Cost of a company audit

[DaveBlue]

I am a one of thirty shareholders in a PLC and the company has been asked to undertake an audit by the shareholders. The turnover is approx. £50,000 per annum and we employ one employee. The board have said that it will cost circa £5,000 for the audit. Does this amount seem reasonable as I have read that audits average 0.25% - 1.00% of turnover. Can anybody suggest what an average cost would be by a registered auditor? Thanks in advance.

 

[Paul Kelly ICHYB]

You want an audit on a £50k t/o company? Really?

Why? On that turnover most accountants should be able to do something informal, indeed, someone with reasonable business skills could probably do it.

As for costs, the official audit requirement/s are:

• Annual turnover of more than £10.2 million
• Total assets of more than £5.1 million
• Average number of employees of more than 50

So, 0.25% on £10.2m is..... £25.5k. £5k sounds like a bargain - an unnecessary one at that!

 

[fisicx]

What does the company do?

Have the directors put the audit out to tender?

 

[MyAccountantOnline]

I am a one of thirty shareholders in a PLC and the company has been asked to undertake an audit by the shareholders. The turnover is approx. £50,000 per annum and we employ one employee. The board have said that it will cost circa £5,000 for the audit. Does this amount seem reasonable as I have read that audits average 0.25% - 1.00% of turnover. Can anybody suggest what an average cost would be by a registered auditor? Thanks in advance.

It's a very long time since I dealt with a company that needed an audit so I can't help with fees.

If you definitely want an audit you'd probably be best contacting a few auditors and getting quotes.

What type of business is it for?

 

[Mark T Jones]

I might be out of date, but my understanding is that a PLC must be audited by law?

Re costs, ask around, but i imagine the number, nature and complexity of transactions will be key factors, as will be regulatory issues specific to your industry

 

[MikeJ]

I'd imagine with that turnover he means private limited company.

 

[DontAsk]

I am a one of thirty shareholders in a PLC and the company has been asked to undertake an audit by the shareholders. The turnover is approx. £50,000 per annum and we employ one employee. The board have said that it will cost circa £5,000 for the audit. Does this amount seem reasonable as I have read that audits average 0.25% - 1.00% of turnover. Can anybody suggest what an average cost would be by a registered auditor? Thanks in advance.

Are you sure it's a plc? Wat's the annual cost of running a plc? I would expect it to be a fair chunk of that turnover, let alone any resulting profit.

Who is "we" the employer. Who are the directors?

 

[Scalloway]

The board have said that it will cost circa £5,000 for the audit. Does this amount seem reasonable

A couple of charities I am involved with had to have audits recently due to OSCR's rules . They had one off spikes in income from about £100,000 to the audit threshold of £500,000. £5,000 sounds about right.

 

[Tables Force]

I might be out of date, but my understanding is that a PLC must be audited by law?

Correct (www.legislation.gov.uk/ukpga/2006/46/section/478)

 

[Tables Force]

I am a one of thirty shareholders in a PLC and the company has been asked to undertake an audit by the shareholders.

If you are a PLC, there will be an audit requirement regardless of the shareholders asking for it or not.

Perhaps consider reregistering as private LTD company.

The turnover is approx. £50,000 per annum and we employ one employee. The board have said that it will cost circa £5,000 for the audit. Does this amount seem reasonable as I have read that audits average 0.25% - 1.00% of turnover. Can anybody suggest what an average cost would be by a registered auditor?

Perhaps ask the board where they have got that figure from?

Really it will (should) depend on if this is the first you're being audited, what type of internal controls there are, hoe well things are documented etc.

 

[Tables Force]

What does the company do?

What type of business is it for?

OP has previously been asked this question with no answer (assuming it is the same company)

Companies House

Does anybody know what "directors have sole rights to shares" mean when listed at Companies House? I have searched the CH website to no avail.

www.ukbusinessforums.co.uk

 

[Newchodge]

I assume, I don't know why, that it is a management company for a residential property with 30 odd leasehold tenants.

 

[JEREMY HAWKE]

50K I would have to sell one of my cars

 

[UK Contractor Accountant]

PLC - does the OP mean Private Limited Company?

Or do they actually mean Public Limited Company?

 

[Bobbo]

As others have pointed out, it would be worth confirming if it is actually a public limited company, or whether you are misusing the abbreviation 'plc' and actually mean a private limited company.

As to the cost of an audit, yes the board are right it will cost (at least) £5,000.

 

[Paul Kelly ICHYB]

I would think general compliance costs of a PLC would be more than £50k a year, so @DaveBlue please let us know what it is.

My guess, as Clinton mentioned a ltd co for building management (with that value) or a club.

 

[Newchodge]

I would think general compliance costs of a PLC would be more than £50k a year, so @DaveBlue please let us know what it is.

My guess, as Clinton mentioned a ltd co for building management (with that value) or a club.

I thought that was my guess #12

 

[Paul Kelly ICHYB]

I thought that was my guess #12

Apologies, I had jumped to the other thread and hadn't seen your comment!

It is the most logical guess.

 

[fisicx]

@DaveBlue - why do the shareholders want an audit? Is this to find out if the directors have been fiddling the books? Maybe the directors have quoted this figure in the hope you will back down.

 

[Newchodge]

@DaveBlue - why do the shareholders want an audit? Is this to find out if the directors have been fiddling the books? Maybe the directors have quoted this figure in the hope you will back down.

Probably, but I don't think the directors have a choice. The shareholders would not take this action without believing there is a serious issue. The Directors pushingh back tends to reinforce that there IS a serious issue.

 

[David Griffiths]

Probably, but I don't think the directors have a choice. The shareholders would not take this action without believing there is a serious issue. The Directors pushingh back tends to reinforce that there IS a serious issue.

I wouldn't be sure about that. Most non accountants don't have the slightest understanding of what an audit is. We still get lenders and mortgage brokers asking for "audited accounts" even though the requirement for audit for the vast majority of companies was removed years ago. What they really mean is a set of accounts prepared by a professional accountant and happily accept what is sent even though the cover page specifically says that they are Unaudited Accounts.

It's a fair bet that there is some kind of shareholder dissatisfaction, and someone has gone online and found that an audit can be demanded by holders of 10% of the shares - on equal shareholdings that would be 3 people out of 30. They almost certainly have no idea what it would cost, and also overlook that the cost would be coming out of their share of profits to some extent.

I don't think that the OP has expanded on the reason for the request, but for me it has all the hallmarks of a (possibly petty) squabble amongst shareholders. (The OP has not been back on the site since the first post)

 

[DaveBlue]

You want an audit on a £50k t/o company? Really?

Why? On that turnover most accountants should be able to do something informal, indeed, someone with reasonable business skills could probably do it.

As for costs, the official audit requirement/s are:

• Annual turnover of more than £10.2 million
• Total assets of more than £5.1 million
• Average number of employees of more than 50

So, 0.25% on £10.2m is..... £25.5k. £5k sounds like a bargain - an unnecessary one at that!

What does the company do?

Have the directors put the audit out to tender?

It's a housing complex and the directors have not said where they got the figure from.

 

[DaveBlue]

It's a very long time since I dealt with a company that needed an audit so I can't help with fees.

If you definitely want an audit you'd probably be best contacting a few auditors and getting quotes.

What type of business is it for?

It's a housing complex.

 

[DaveBlue]

I'd imagine with that turnover he means private limited company.

Yes

 

[DaveBlue]

Are you sure it's a plc? Wat's the annual cost of running a plc? I would expect it to be a fair chunk of that turnover, let alone any resulting profit.

Who is "we" the employer. Who are the directors?

We are the shareholders as are the directors.

 

[Scalloway]

It's a housing complex and the directors have not said where they got the figure from.

From my experience where a couple of charities have had to be audited £5,000 sounds about right.

 

[DaveBlue]

I assume, I don't know why, that it is a management company for a residential property with 30 odd leasehold tenants.

Correct, but it'd not an external management company. The board are all shareholders.

 

[Clinton]

My guess, as Clinton mentioned a ltd co for building management (with that value) or a club.

Not me, guv, but yeah, @Newchodge called it right.

This all looks a bit fishy. It's probably the case that one shareholder with an axe to grind has the required minimum 10% of shareholding to demand an audit, and they have demanded one. It's probably not "shareholders" as stated in the OP but one shareholder.

That's why you should keep each individual shareholder down to under 10% in groups like this. But I guess the OP and his gang didn't take any formal advice before setting up their operation, didn't consult a lawyer, didn't draw up an SA etc etc.

Amazing, especially considering their interpretation of "PLC" suggests they don't understand a lot about all this stuff!

Based on the numbers, this will seem to be an FRS105 case so audit will be cheaper, but it'll will still cost a fair bit of change - between £5K to £10K. The directors can just ignore the audit demand but that'll further upset the disgruntled shareholder and s/he can cause further trouble.

If an audit is done and it discovers breaches of law - for example breaches of CA2006 requirements on keeping registers and making filings - those are potentially criminal offences for the company and company officers. And if this lot didn't take some advice at the start in respect their responsibilities as directors, there's highly likely to be something dodgy going on with at least the record keeping.

It would have been cheaper to take legal advice before setting up the limited company. But at least now, the OP is best off taking legal advice, not asking in a forum.