When does a company lose its audit exemption?

Failing the criteria. Paragraph 13 of Practice Directive 10/2024 says that when a company ceases to qualify it ceases to be exempted, but remains exempted for the accounts of the years in which it did qualify. SSM's FAQ repeats this: eligibility is lost for future financial years while earlier exempt years stand.

How it typically happens

• Two of the three tests are failed in a year. Because tests cover the current and two prior years, one strong year can keep a company out for up to three years, until the high year drops out of the window.
• A dormant company starts trading or records accounting transactions, so it is no longer dormant.
• The company becomes a subsidiary of a public company, or otherwise becomes an excluded type.
• A phase limit is lower than the company's size (for example, Phase 1 limits in 2025).

Other ways to be required to audit

• A written notice from 5% of shareholders or members, or a direction from the Registrar, under paragraph 14.

What to do when the exemption ends

• Appoint an auditor in time (see the first-auditor and reappointment questions).
• Expect opening balances to need checking by the new auditor, since the prior year was unaudited.
• Plan before year-end, not after: SSM expects companies to reassess eligibility every year.