Prior to 1993 all UK companies had their financial statements audited as required by company law. By 2006 an increasing and substantial majority of companies were taking advantage of a legal option for smaller companies not to have an audit. The result over time was a large gap in the confidence that could be expressed in the two very different type of accounts being produced. The reliability of the unaudited set also varied hugely depending upon the care with which they were produced and who was producing them.
It became difficult for bankers, suppliers and others advancing credit to complete transactions or even consider dealing with companies with unaudited accounts. It was with this background that The Assurance Report was born and many companies now seek this more limited report for their accounts.
When instructed we will make enquiries of management and undertake any procedures that we judge appropriate but are under no obligation to perform procedures that may be required for assurance engagements such as audits.
The financial reporting framework on which the financial statements will be prepared and the fact of any known departures will be disclosed. There follows an example report:
Eacotts International Limited reports to the board of directors on the preparation of the unaudited statutory accounts of XYZ Limited for the year ended dd/mm/20yy
In order to assist you to fulfil your duties under the Companies Act 2006, we have prepared for your approval the accounts of XYZ Limited for the year ended dd/mm/20yy as set out on pages x–y which comprise of a Balance Sheet and Profit and Loss account from the company’s accounting records and from information and explanations you have given us.
As a practising member firm of of the Institute of the Chartered Accountants in England and Wales (ICAEW), we are subject to its ethical and other professional requirements which are detailed at icaew.com/ members handbook.
This report is made solely to the Board of Directors of XYZ Limited, as a body, in accordance with the terms of our engagement letter dated dd/mm/20yy. Our work has been undertaken solely to prepare for your approval the accounts of XYZ Limited and state those matters that we have agreed to state to the Board of Directors of XYZ Limited, as a body, in this report in accordance with AAF 2/10 as detailed at icaew.com/compilation. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than XYZ Limited and its Board of Directors as a body for our work or for this report.
It is your duty to ensure that XYZ Limited has kept adequate accounting records and to prepare statutory accounts that give a true and fair view of the assets, liabilities, financial position and profit[/loss] of XYZ Limited. You consider that XYZ Limited is exempt from the statutory audit requirement for the year .
We have not been instructed to carry out an audit or a review of the accounts of XYZ Limited. For this reason, we have not verified the accuracy or completeness of the accounting records or information and explanations you have given to us and we do not, therefore, express any opinion on the statutory accounts.
Eacotts International Limited