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

Zenith Ltd is a small private company in a jurisdiction that allows small companies to be exempt from a statutory audit if they meet size criteria. Which of the following is the best description of the effect of such an exemption?

A qualifying small company that uses an audit exemption need not appoint an auditor or have its accounts audited. It must still keep proper accounting records and prepare financial statements, because the exemption removes only the audit requirement.

  1. AThe company is not legally required to appoint an auditor or have its accounts audited, provided it meets the criteria and the exemption is availableCorrect
  2. BThe company must still have its accounts audited, but only by a member of its board
  3. CThe company is released from keeping accounting records and preparing financial statements

Explanation

An audit exemption removes only the requirement for a statutory audit for qualifying small companies. The company must still keep accounting records and prepare financial statements. Having directors audit the accounts would defeat independence, and the exemption does not remove the record-keeping duty.

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