Statutory Audit

A **Statutory Audit** is an audit of a company's annual financial statements that is mandated by law, performed by an independent registered auditor, and resulting in an opinion under generally accepted auditing standards, typically the International Standards on Auditing (ISAs) issued by the IAASB.\n\nThe threshold for mandatory statutory audit varies by jurisdiction. The EU Audit Directive 2006/43/EC, recast by Directive 2014/56/EU, requires a statutory audit for all public-interest entities (PIEs: listed companies, credit institutions, insurers) and for medium and large undertakings under the Accounting Directive 2013/34/EU thresholds. Member states can exempt small undertakings, and most do.\n\nIn the United Kingdom, audit exemption is available to small companies meeting two of three tests in the Companies Act 2006: turnover up to 10.2 million GBP, balance sheet total up to 5.1 million GBP, and employees up to 50. In the United States, statutory audit is required for SEC-registered companies under the Securities Exchange Act of 1934 with PCAOB oversight; private US companies are not subject to a federal statutory audit, although individual states or lenders may require one.

You will encounter statutory audit obligations once your company crosses local size thresholds, becomes listed, takes on regulated activities such as banking, insurance, or asset management, or signs covenants with lenders that require audited financials. Audited financials are also a baseline requirement for most M&A and fundraising due diligence processes.