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What is an Audit?

An audit is an independent examination of a process, financial statement, or quality system to verify it meets required standards. It can cover an entire organisation or focus on specific functions  with objectives ranging from risk assessment and performance evaluation to regulatory compliance.

What is an external audit?

A statutory or external audit involves an independent examination of a company's financial statements to determine whether they give a true and fair view of the business's financial position. It is the most common form of audit in the UK and a legal requirement for many companies.

Who appoints external auditors?

Shareholders typically appoint the external auditor at the company's Annual General Meeting (AGM). The resolution is passed by ordinary majority and the appointment is formally recorded in the AGM minutes.

Who performs an external audit?

An ICAEW or ACCA-registered audit firm, or an independent registered auditor, performs the audit. Auditors must hold a Registered Auditor (RA) licence to sign off statutory audit reports in the UK — holding a general accountancy qualification alone is not sufficient.

Does your company need an external audit?

A statutory audit is mandatory for most UK companies unless they qualify for an exemption.

Companies that must have an audit regardless of size include:

• Public companies
• Subsidiary companies (unless exempt)
• Authorised insurance companies and those carrying out insurance market activity
• Banking businesses
• Electronic money (e-money) issuers
• MiFID (Markets in Financial Instruments Directive) investment firms
• UCITS management companies
• Companies with shares traded on a regulated market
• Funders of master trust pension schemes
• Special register bodies and pensions or labour relations bodies

Small company audit exemption updated April 2025:

To qualify as small and claim audit exemption, a company must meet at least two of the following three thresholds:

• Annual turnover not exceeding £15 million
• Total assets not exceeding £7.5 million
• No more than 50 employees

Thresholds updated under the Companies Act 2006 (Amendment) Regulations 2025, effective for financial years beginning on or after 1 January 2026. Source: Companies House / BEIS.

Even if exempt, shareholders holding 10% or more of shares can formally request an audit.

Is an auditor only focused on a small business's annual accounts?

Not necessarily. While statutory audit focuses on annual financial statements, auditors can also be engaged for additional work such as due diligence, forensic investigations, grant certification, or agreed-upon procedures provided the auditor remains independent and takes no part in the firm's management or day-to-day operations.

How long does it take to complete an external audit?

Audit timelines depend on company size and the quality of internal records. A straightforward audit can typically be completed in 4 to 6 weeks. More complex engagements follow a three-phase structure: planning (approximately 4 weeks), fieldwork (approximately 4 weeks), and reporting and sign-off (approximately 4 weeks).

The single biggest factor that slows audits down is the client's own record-keeping not the auditor's workload. Well-prepared books consistently result in faster, cheaper audits.

What happens after an external audit?

Auditors issue a formal Auditor's Report to shareholders, expressing one of four opinions:

Auditors also typically issue a separate management letter to the audit committee, highlighting control weaknesses and recommended process improvements this is not made public.

Is detecting fraud the responsibility of external auditors?

No and this is one of the most commonly misunderstood aspects of audit. External auditors are not responsible for detecting or preventing fraud. Their responsibility is to provide reasonable assurance that financial statements are free from material misstatement whether caused by fraud or error. Primary responsibility for fraud prevention sits with a company's own management and internal controls.

Frequency of external audit?

For most UK companies, a statutory audit is required annually. The audited accounts must be filed with Companies House within nine months of the company's financial year end. Missing this deadline results in automatic penalties starting at £150 for private companies.

What should your small business do with the audited accounts?

Audited accounts must be filed with Companies House annually. They are published publicly, which allows suppliers, investors, lenders, and trading partners to assess your financial position. A clean audit opinion on public record strengthens commercial credibility a qualified or adverse opinion will raise questions from anyone conducting due diligence on your business.

Can my accountant serve as my Auditor?

No. Under UK auditing standards, a person or firm cannot act as auditor if they are an officer, employee, partner, or otherwise connected to the management of the company. A firm that prepares your financial statements cannot then audit those same statements doing so would mean checking their own work, which removes the entire value of an independent audit opinion. You will need a separate, independent registered audit firm.

How to prepare for your first statutory audit?

1. Agree a timeline with your auditor well before the year end
2. Designate an internal audit coordinator as the main point of contact
3. Brief relevant staff on what the process involves and what they'll be asked to provide
4. Conduct regular progress meetings with the audit manager during fieldwork
5. Draft and review control and process documentation
6. Prepare and organise key documents in advance (see list in the cost-effective audit section below)
7. Review all relevant records and reconcile any outstanding items before fieldwork begins
8. Prepare the audit working paper file

How much does an external audit cost?

Audit fees are influenced by company size, transaction volume, industry complexity, the quality of your bookkeeping, and whether specialist expertise (such as an IT or valuation expert) is required. See the full pricing breakdown in the Audit Fees section below.

One point worth understanding: a qualified or adverse audit opinion does not reduce your audit fee. The audit work required to reach that conclusion is typically greater, not less. Investing in accurate, well-organised records before the audit is the most direct lever you have on cost.

How to prepare for a cost-effective external audit?

Ensure all accounting staff are available during the on-site fieldwork period. Having the following documents organised and ready before the auditor arrives minimises disruption and reduces billable time:

• Draft financial statements and directors' report
• Organisational chart
• Year-end bank reconciliation statements (all accounts, including dormant ones)
• Detailed balance sheet listings with supporting invoices for fixed assets and significant expenses
• Aged accounts payable and receivable listings
• P11D returns and payroll/wage records
• Inventory reports and stock count records
• Hire purchase and leasing agreements
• VAT returns and supporting workings
• Summary of post-balance sheet events
• Internal audit reports (if applicable)
• Board minutes throughout the year and records of any changes to share ownership

What is an internal audit?

An internal audit is an independent, objective function within a company that monitors the effectiveness of internal controls, risk management processes, and governance procedures established by management. Unlike a statutory audit, it is not a legal requirement but it is considered best practice for any business of meaningful size or complexity.

Who does the internal Auditor report to?

The Chief Internal Auditor (CIA) reports to the audit committee on governance and independence matters, and to the CEO for day-to-day administrative purposes. This dual reporting line is deliberately structured to protect the internal audit function's independence from the management it is reviewing.

Frequency of internal audit?

This depends on the organisation's risk profile and regulatory environment. Internal audits can be performed on a rolling basis daily, weekly, monthly, or annually aligned to the areas of highest risk. Regular internal auditing helps identify gaps in compliance before they become regulatory issues or financial exposures.

Why have an internal audit function?

Management is ultimately responsible for the effectiveness of internal controls. An internal audit function provides an independent mechanism to test whether those controls are actually working giving the board, audit committee, and shareholders genuine confidence in operational and financial reporting, rather than just assuming controls are functioning as designed.

What are the internal controls?

Internal controls are the policies and procedures a company's management puts in place to achieve business objectives while remaining compliant with regulations, protecting assets, improving operational accuracy, and ensuring reliable financial reporting. Common examples include segregation of duties, authorisation limits for payments, reconciliation procedures, and IT access controls.

Audit Exemption Is Changing What UK Businesses Need to Know in 2026

The UK government raised the small company audit exemption thresholds for financial years beginning on or after 1 January 2026, under the Companies Act 2006 (Amendment) Regulations 2025. This is the most significant change to UK audit thresholds in over a decade.

The new thresholds to qualify as small and therefore potentially exempt from statutory audit are:

• Annual turnover not exceeding £15 million (previously £10.2m)
• Total assets not exceeding £7.5 million (previously £5.1m)
• No more than 50 employees (unchanged)

A company must meet at least two of these three criteria.

What this means practically:

Some businesses that were previously required to have a statutory audit may now qualify for exemption. If your turnover sits between £10.2m and £15m, or your assets between £5.1m and £7.5m, it is worth reviewing your position with a qualified accountant now.

However, exemption is not automatic, and there are important caveats:

• Subsidiary companies within a group may still require an audit even if they individually qualify as small
• Shareholders holding 10% or more of shares can require an audit regardless of size
• Regulated businesses FCA-authorised firms, charities, public companies remain subject to mandatory audit regardless of these thresholds
• Banks, insurers, and e-money issuers are unaffected by these changes

If you are unsure whether the new thresholds change your audit obligation, consult a qualified accountant or registered auditor do not assume exemption applies without checking your specific group structure and shareholder position.

Why Some Businesses Choose a Voluntary Audit Even When Exempt

Once a business qualifies for audit exemption, many owners assume they should take it. Lower cost, less disruption, faster year-end the logic seems obvious. But a growing number of UK businesses deliberately choose a voluntary audit, and there are sound commercial reasons for it.

Raising finance or investment. Banks and institutional investors routinely ask for audited accounts before approving lending or investment, even when it is not a legal requirement. An unaudited set of accounts from an owner-managed business carries less weight in a credit or due diligence process than one signed off by a registered auditor.

Selling the business. If you plan to sell within the next three to five years, having two or three years of audited accounts on record significantly simplifies the buyer's due diligence process and can strengthen your negotiating position on valuation.

Tendering for public sector contracts. Many public sector procurement frameworks require or strongly prefer audited financial statements from suppliers, particularly for contracts above certain value thresholds.

Shareholder confidence. Where a business has multiple shareholders who are not all involved in day-to-day management, a voluntary audit provides independent assurance that the financial statements accurately reflect what is happening reducing the risk of disputes.

A voluntary audit typically costs the same as a statutory one for a business of equivalent size. The question is not really whether you can afford one it's whether the commercial benefit justifies it for your specific situation.

What to Actually Ask an Auditor Before You Hire Them

Most guides tell you to "check their experience and fees." That's not enough. Here are the questions that separate a good auditor from the right auditor for your business based on what we've seen go wrong when businesses skip them.

1. "Have you audited a business of our size and structure before?"
Audit methodology scales with complexity. A firm experienced with owner-managed SMEs may not have the capacity or systems to handle a group audit with subsidiaries. Ask for a specific example, not a general yes.

2. "Who will actually do the work a partner or a junior?"
At larger firms, the partner wins the business and a junior team member does the fieldwork. For smaller companies, this can mean a mismatch in attention and communication. Know upfront who your day-to-day contact will be.

3. "What is your average turnaround time for a business like ours?"
Filing deadlines at Companies House are fixed. A nine-month window sounds generous until your auditor has a backlog. Ask for their average completion time and whether they have capacity issues in the months your audit is scheduled.

4. "What will cause your fees to increase after we agree a quote?"
Most audit fee disputes come from scope creep poor records, unexpected transactions, or last-minute management queries. A transparent auditor will tell you exactly what triggers additional charges before you sign anything.

5. "Are you familiar with our industry's specific reporting requirements?"
A charity audit operates under Charity Commission SORP. An FCA-regulated firm has additional client asset reporting obligations. A construction company may have complex revenue recognition under IFRS 15. Generic audit experience is not the same as sector-specific knowledge.

The Real Reason Audits Get Delayed And How to Avoid It

In our experience matching businesses with auditors across the UK, the most common reason audits run over time and over budget has nothing to do with the auditor. It's the client's records.

Specifically, these three issues come up repeatedly:

Incomplete bank reconciliations. If your year-end bank reconciliations aren't finalised before the auditor arrives, fieldwork cannot start properly. Auditors will wait and charge you for the time. Reconcile every account, including dormant ones, before the audit begins.

Undocumented related-party transactions. Loans between the company and directors, inter-company transactions, or payments to connected parties are an immediate audit flag. These aren't a problem if they're documented and disclosed they become a problem when the auditor discovers them and you can't explain them promptly.

No maintained fixed asset register. Auditors need to physically verify or confirm significant assets. If you don't have a register with purchase dates, costs, depreciation rates, and disposal records, expect this to add days to your fieldwork and your invoice.

Addressing these three things before your auditor starts will have a more direct impact on your final bill than almost anything else you can do.

Auditor Independence Why It Matters and What It Means for You

A question we're frequently asked: "Can I use the same firm for both my accounts preparation and my audit?"

The answer is no  and understanding why matters.

UK auditing standards, overseen by the Financial Reporting Council (FRC), require auditors to be independent of the entity they audit. A firm that prepares your financial statements cannot then audit those same statements. Doing so would mean effectively checking their own work, which removes the entire purpose of an independent audit opinion.

This means if your current accountant prepares your annual accounts, you will need a separate, independent registered audit firm to conduct the audit. The two firms will communicate — your accountant provides working papers and draft accounts to the auditor — but the audit opinion must come from a firm with no involvement in preparing the underlying figures.

This is not a bureaucratic inconvenience. It is the mechanism that gives your shareholders, lenders, and trading partners confidence that your financial statements have been reviewed by someone with no financial interest in making them look favourable.

Cost of Hiring Auditors in London and the UK

The cost of hiring auditors in the UK varies depending on business size, location, complexity, and regulatory requirements. London-based auditors generally charge higher fees due to operating costs and the complexity of clients, while firms outside London may offer more competitive pricing.

Audit Fees in the UK: Pricing Overview

Based on fee data from Experlu's network of registered UK audit firms. Last updated May 2026.

Factors That Affect the Cost of Hiring Auditors in the UK

• Company turnover and size
• Number of transactions and employees
• Quality of bookkeeping and internal controls
• Industry regulations (FCA, charities, construction, property)
• Group or subsidiary structures
• Location — London vs regional UK firms
• Compliance with group audit instructions
• Number of inventory count locations
• Whether a specialist (IT auditor, valuation expert) is required

Well-maintained bookkeeping and organised records are the single most effective way to reduce your audit fees. Auditors charge for their time the less time they spend chasing missing documents, the lower your bill.

Is Hiring a UK Auditor Worth the Cost?

For businesses required to undergo a statutory audit, hiring an experienced UK auditor is essential for legal compliance. Beyond compliance, a good auditor will also flag financial risks you may not have identified, suggest improvements to internal controls, and produce a report that strengthens stakeholder confidence in your business. Many businesses find the long-term value outweighs the initial cost significantly.

London vs Regional Auditors in the UK: A Practical Comparison

Businesses regularly ask whether to hire an auditor in London or work with a regional UK audit firm. Both have genuine advantages and the right choice depends on your business size, complexity, and how much personal attention you need.

Many regional UK audit firms now deliver London-level technical expertise at lower cost making them an increasingly popular choice for growing businesses that want quality without the London price premium.

Why do you need an auditor?

You may qualify for audit exemption if your business meets at least two of the updated 2026 thresholds: turnover under £15 million, assets under £7.5 million, or fewer than 50 employees. But even exempt businesses sometimes need one see the voluntary audit section above for the commercial cases.

Businesses that must have an audit regardless of size include:

• A public company
• A subsidiary company
• An authorised insurance company or one carrying out insurance market activity
• Banking businesses
• An issuer of electronic money
• A MiFID investment firm
• A UCITS management company
• A company with shares traded on a regulated market
• A funder of a master trust pension scheme
• A special register body or pensions/labour relations body

A professional auditor provides an independent report based on a thorough examination of your financial documents. They ensure compliance with UK regulatory requirements and help you avoid penalties, filing errors, and legal consequences. An unqualified audit opinion on public record builds genuine trust with shareholders, investors, lenders, and trading partners.

How do we select the best auditor?

Selecting the right auditor requires more than comparing fees. Here's what actually matters:

Fees
Budget matters but the cheapest auditor is rarely the best value. The cheapest quote may reflect inexperience, a lack of sector knowledge, or a tendency to underquote and then add fees during fieldwork. Request detailed proposals and ask what circumstances would trigger additional charges.

Sector experience
Auditing a property group is fundamentally different from auditing a fintech startup or a charity. Choose a firm that has specific, recent experience in your industry not just general audit experience. Ask for examples.

Firm size vs your size
A small business with a straightforward audit will get more attention and better value from a mid-tier regional firm than from a Big Four practice. Equally, a large group audit needs a firm with the capacity and technical resource to handle consolidated reporting. Match firm size to engagement size.

Recommendations and reviews
Ask other business owners in your sector for referrals. Read verified reviews. Check the auditor's firm on the ICAEW or ACCA public register to confirm they hold a current Registered Auditor licence and have no disciplinary history.

FAQs: Hiring Auditors in London and the UK

How much does it cost to hire auditors in London?

Audit fees in London typically start from £3,000 for small companies and can exceed £50,000 for large or group audits. London-based firms generally charge 10–15% more than regional UK firms due to higher operating costs and the complexity of the clients they typically serve.

Are regional auditors cheaper than London auditors?

Generally yes. Regional firms carry lower overheads and pass this on in fees while still meeting the same statutory audit standards. For SMEs, owner-managed businesses, and charities, a regional auditor often represents better overall value.

Do I legally need an auditor in the UK?

As a small non-listed company, you need a statutory audit if you exceed two of the following thresholds: turnover over £15 million, total assets over £7.5 million, or more than 50 employees (thresholds updated for financial years beginning on or after 1 January 2026). Regulated businesses, charities, and public companies require an audit regardless of size.

Can a UK auditor work remotely with my business?

Yes. Most UK auditors work nationally and conduct much of their work remotely. Location rarely affects audit quality, provided the firm holds the required Registered Auditor licence and has relevant experience in your sector.

How long does a UK statutory audit take?

A typical statutory audit for a small or medium-sized business takes 2 to 6 weeks, depending on record quality, business complexity, and the auditor's current workload. Complex group audits can take significantly longer.

How can I reduce my audit costs?

Maintain accurate bookkeeping throughout the year, reconcile all accounts before fieldwork begins, prepare key documents in advance, respond promptly to auditor queries, and choose an auditor with direct experience in your sector. Well-prepared records are the single biggest cost lever available to you.

What is the difference between a statutory audit and an independent examination?

A statutory audit is a formal, legally-defined process conducted by a Registered Auditor, resulting in a signed audit opinion. An independent examination is a lighter-touch review available to smaller charities below the audit threshold  it does not produce a formal audit opinion and has less evidential rigour. If you're unsure which applies to your organisation, ask a qualified accountant.

Content reviewed by Rajesh M., ACA (ICAEW),  Audit Support Specialist, ex KPMG &  Deloitte, 20+ years' experience in Audit, advisory and financial reporting. Last reviewed and updated: May 2026. Statutory threshold information sourced from Companies House and the Companies Act 2006 (Amendment) Regulations 2025.