Working out whether a company needs an audit can be confusing. A couple of years ago, we had new exemption thresholds and a change to the definition of an ineligible group. This series will look at the three most important questions when determining a company’s eligibility for small company exemption:

• does it meet the size criteria?

• if the company is part of a group, is the group small?

• is the company excluded on the grounds of eligibility?

Size criteria

A company qualifies as small if it satisfies at least two of the three size criteria:

• turnover less than £10.2m;

• balance sheet total below £5.1m; and

• less than 50 employees.

A company will no longer qualify as a small company, and therefore will be required to have a statutory audit, if it breaches two criteria, in two consecutive financial years. There are further rules for group companies, which will be covered in the second part of this series.