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

Zeta Ltd is a small private company in a jurisdiction that follows the typical Global variant approach to company law. Its directors want to know whether the company must appoint an external auditor each year. Which factor is the main basis on which a company may qualify for an audit exemption?

Audit exemption is generally available to companies that are small, measured by size thresholds such as turnover, total assets and number of employees. Age, share classes or board composition do not determine exemption, so size is the main basis for qualifying.

  1. AThe company being small, judged by limits such as turnover, assets and employeesCorrect
  2. BThe company having only one class of shares
  3. CThe company having been incorporated for more than ten years
  4. DThe company having a majority of non-executive directors

Explanation

Audit exemption regimes are generally based on size, tested by thresholds such as turnover, balance sheet total and number of employees. The age of the company, the share classes and the board composition are not the basis of exemption. Option C is wrong because the length of time since incorporation is irrelevant to exemption.

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