When a limited company in the UK exceeds the statutory audit threshold, it must undergo its first mandatory audit. This step is significant, requiring careful consideration in selecting and appointing the right auditor to safeguard the company's compliance and financial reputation.
Understanding the Audit Threshold
As of April 2025, your company must appoint an auditor if it meets at least two of these criteria in a financial year:
- Annual turnover over £15 million
- Gross assets above £7.5 million
- 50 or more employees
Failing to comply exposes the company to legal penalties and reputational damage.
Legal Process for Appointing the First Auditor
- Directors' Responsibility: The directors typically appoint the first auditor after the company crosses the audit threshold—or after a period of exemption.
- Shareholder Approval: Once the accounts are presented, shareholders can reappoint the auditor or choose a new one by resolution, usually within 28 days of receiving the annual accounts.
- Eligibility and Independence: The appointed auditor must be independent and hold the appropriate qualifications.
Factors to Consider When Selecting Your First Auditor
1. Qualifications and Registration
- Ensure the auditing firm or individual is registered with a Recognised Supervisory Body (RSB) such as ICAEW, ACCA, or ICAS.
- Verify that they hold the correct practising certificate and have no conflicts of interest with the company.
2. Industry Experience
- Shortlist firms with proven experience auditing companies of similar size and sector.
- Look for auditors who understand the nuances of your industry, which can improve efficiency and produce more valuable insights.
3. Reputation and References
- Investigate the auditor's track record, reputation for integrity, and history of delivering audits on time.
- Ask for recommendations or testimonials from similar businesses.
4. Audit Approach and Technology
- Review the auditor's methodology, including their use of technology and data analytics to improve audit quality.
- A modern, risk-focused approach is generally more efficient and insightful.
5. Independence and Objectivity
- Confirm there are no personal, professional, or financial relationships that compromise the auditor's independence.
- Ask for a formal declaration of independence before engagement.
6. Fee Structure
- Obtain detailed and transparent proposals, including all potential additional costs.
- Balance cost with quality; the cheapest option is rarely best for a first statutory audit.
7. Communication and Support
- Assess the auditor's commitment to regular, clear communication.
- Good auditors support clients through the process and help them understand findings, recommendations, and any regulatory changes.
The Appointment Process: Step-by-Step
Step |
Description |
Define Needs |
Clarify scope, expectations, regulatory requirements, and timelines. |
Shortlist Candidates |
Based on qualifications, experience, and references. |
Request Proposals |
Collect fee quotes, outline services, and clarify commitments. |
Interview Finalists |
Assess technical ability, approach, and chemistry with your team. |
Confirm Independence |
Secure written confirmation of independence and eligibility. |
Board Appointment |
The board of directors makes the formal appointment of the first auditor. |
Notify Members & Authorities |
Inform shareholders, include in the annual accounts, and notify Companies House if required. |
What to Avoid
- Rushing the decision: Take time to compare and vet several audit firms.
- Ignoring eligibility: Hiring a non-qualified firm can invalidate the audit.
- Neglecting independence: An auditor with conflicts of interest impairs audit validity and trustworthiness.
The Value of a Good Auditor
A capable, independent auditor not only ensures compliance but can also add value by identifying internal control weaknesses, inefficiencies, and opportunities for improvement. The best auditors become trusted advisors who help the company grow and adapt to changing regulations.
By carefully selecting and appointing the right auditor when crossing the audit threshold, a limited company sets a foundation for sound governance and successful stakeholder relationships.
Why Choose Simpson Wreford LLP as Your First Auditor?
Choosing the right auditor is crucial for your business's compliance, financial clarity, and future growth. Simpson Wreford LLP are registered auditors regulated by the ICAEW, offering unrivalled expertise, and a personal approach tailored to support businesses just like yours. Here's why we are the preferred choice for companies embarking on their first statutory audit:
- Established Experience: With over 135 years of proven success, Simpson Wreford LLP brings deep knowledge and expertise in auditing diverse businesses, including limited companies needing their first audit.
- Dedicated Personal Service: We prioritise building strong relationships with our clients, offering a responsive team who understand your business and speak your language—no jargon, just clear, practical advice.
- Efficient and Professional Audits: Our audit process is designed to be thorough yet minimally disruptive, allowing you to focus on running your business while we ensure compliance and deliver valuable insights.
- Tailored Support and Advice: Beyond statutory requirements, we identify strengths and areas for improvement, helping you safeguard assets, reduce risks like fraud, and enhance financial controls.
- Trusted by Clients: Our clients praise us for being prompt, reliable, and providing recommendations that add real value. Many have benefited from our proactive guidance that supports business growth and smooth transitions to digital accounting tools.
- Local and Accessible: Based in Royal Arsenal, London, we are accessible to businesses across the south-east, offering face-to-face meetings and ongoing support aligned with your schedules.
- Comprehensive Services: From statutory audits to internal audits, due diligence, and accounts preparation, we provide a full spectrum of services tailored to your business needs under one roof.
Choosing Simpson Wreford LLP means partnering with a team committed to your success, delivering audits that do more than comply—they empower. Contact us today for a consultation and discover how we can support your business as it grows and meets new challenges.