Does an FCA-regulated firm need a statutory audit?

Whether an FCA-regulated firm requires a statutory audit depends on both its size and the activities it carries out. While some firms may qualify for audit exemption, many FCA-regulated entities are specifically excluded from the small companies audit exemption rules, even where they meet the small company size thresholds.

The key points below can also be useful for those who have recently changed FCA permissions or classifications. As this is a highly complex legal and regulatory area, we’d recommend that you seek specialist compliance advice in the first instance, in order to better understand your FCA permissions.

Do all UK companies need an audit?

Under UK law, as a starting point, all UK companies and limited liability partnerships (LLPs) require a statutory audit, unless an exemption is available based on specific criteria. The main factors that impact the ability of entities to claim exemptions are the size of the entity and the type of activity it carries out.

Please note that we have not considered the effects of being a member of a group as part of this article. If your entity is a parent or a subsidiary, there are additional factors to consider. Please get in touch with us if this is the case, and we can assist you further.

Does your firm qualify as a small company?

Section 477 of the Companies Act 2006 (CA2006) grants qualifying small companies an exemption from statutory audit.

For accounting periods beginning on or after 6 April 2025, a company will generally qualify as small if it meets any two of the following criteria for two consecutive reporting periods:

• Turnover of £15 million or less (pro-rated for periods longer or shorter than 12 months),
• Balance sheet total (gross assets) of £7.5 million or less, and/or
• An average of 50 employees or fewer during the period.

For more information on the revised thresholds and their implications, read our article on company size thresholds and their impact on businesses.

FRS 102 changes

Significant changes to FRS 102 came into effect from 1 January 2026. Businesses should consider whether the revised accounting requirements could affect their financial reporting or company size assessment. You can read more in our article on FRS 102 changes or listen to our episode on understanding the impact of these changes over on our Business Talks podcast.

Which FCA-regulated activities require an audit?

However, many FCA regulated companies are excluded from qualifying as small companies and are not exempt from statutory audit, even if they meet the small size criteria above.

Essentially, this is the case if your company is:

• An authorised insurance company,
• A banking company,
• An e-money issuer,
• A Markets in Financial Instruments Directive (MiFID) investment firm,
• An Undertakings for the Collective Investment in Transferable Securities (UCITS) management company, or
• A pension scheme, under certain conditions.

Many of these types of company carry out regulated activities. These are defined by the FCA handbook and are extensive. Some examples of the most common activities include, but are not limited to:

• Dealing in (whether as principal or agent), arranging, managing, safeguarding and administering, or advising on investments,
• Establishing, managing, operating, or winding up a UK UCITS, Authorised Investment Funds (AIF), or collective investment scheme,
• Accepting deposits, issuing electronic money, advising on or entering into regulated mortgage contracts, credit broking, and entering into regulated credit agreements as lender, and other functions typical of banking, credit, or insurance institutions, and
• Debt adjusting, counselling, collecting, or administration.

If you’re in doubt as to whether your activity falls under this category, we’d recommend that you contact your compliance consultant and seek legal advice.

Do MiFID investment firms need an audit?

Whether your company falls under this category is a very complex area that requires careful consideration. Generally speaking, these are investment firms within the meaning of Article 2.1A of Regulation (EU) No 600/2014, other than:

• A company which is exempt from the definition of an investment firm by Schedule 3 to the Financial Services and Markets Act 2000,
• A company which is an exempt investment firm as defined by regulation 8 of the Financial Services and Markets Act 2000 Regulations 2017, and
• Any other company which fulfils all the requirements set out in regulation 6(3) of those regulations.

What happens if your firm is not exempt from audit?

UK company directors, and LLP designated members, are required to comply with a broad range of duties and responsibilities. If your company requires a statutory audit, these duties include appointing a UK statutory auditor and ensuring the financial statements are appropriately filed with the FCA, Companies House, and HM Revenue & Customs (HMRC) correctly and on time.

Businesses should also keep up to date with forthcoming Companies House reforms and filing requirements. You can read more in our article on the latest ECCTA accounts reform and what it means for UK companies.

Penalties for failing to comply with these range from fines and loss of FCA permissions to criminal proceedings taken against the directors or members personally.

Other audit requirements for FCA-regulated firms

It’s worth noting that even if your company doesn’t require a statutory audit under the CA2006 above, it may still need a Client Money and Custody Asset (CASS) audit, or a safeguarding audit depending on its activities, even if it doesn’t have permission to hold client money.

Also, if your company or LLP has changed its FCA permissions, then there may have been a change in whether or not a statutory audit is required. However, if an audit was required in previous years due to being excluded from the small companies regime, then your company would have been classified as medium or large historically.

You would therefore need to qualify as small for two consecutive years to take advantage of this exemption from a statutory audit. Our article on company size thresholds and their impact on businesses explains the transitional rules in more detail.

How Saffery can help

If you believe your firm requires an audit, it’s important to take action early, as the reporting deadline to the FCA is usually only 80 business days from your financial year end. We have extensive experience in auditing FCA regulated entities, please get in touch with Tom Alun-Jones if you need help in getting started.

Some FAQs, that may assist with your assessment around whether you need an audit.

Can a small FCA-regulated firm claim audit exemption?

Not always. Certain FCA-regulated entities are excluded from the small companies audit exemption regime regardless of size.

Do MiFID investment firms require an audit?

Many MiFID investment firms are not eligible for audit exemption and should seek specialist advice regarding their regulatory status.

Can a firm still need an audit if it qualifies as small?

Yes. Audit requirements can arise from regulatory requirements, group structures, investor requirements, lending arrangements or specific FCA obligations.

Does changing FCA permissions affect audit requirements?

Yes. A change in permissions may affect whether a firm qualifies for audit exemption and specialist advice should be obtained where permissions have changed.

This article is based on law and information available at 14 July 2026, is intended for information purposes only, and shouldn’t be taken as legal advice.