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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Nuvola Ltd is a small private company that qualifies for audit exemption under its national law and whose members have not requested an audit. Which of the following is the correct position on the company's accounts?

An exempt small company does not need an audit, but its directors must still keep proper accounting records and prepare annual accounts. Audit exemption removes only the audit requirement, not the duty to keep records or prepare accounts.

  1. AThe company must still appoint an auditor, but the auditor need not report on the accounts
  2. BThe company need not have its accounts audited, but it must still keep accounting records and prepare accountsCorrect
  3. CThe company is released from keeping accounting records and preparing annual accounts

Explanation

Audit exemption removes only the requirement for an audit. The directors must still keep adequate accounting records and prepare annual accounts that give a true and fair view. The first option is wrong because no auditor need be appointed. The third option confuses audit exemption with an exemption from record-keeping.

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