Late Filing of Audited Financial Statements
Missing a Companies House filing deadline is never ideal. Directors are understandably keen to avoid late filing penalties, particularly where the accounts are only days or weeks away from completion. However, in many cases, filing a set of unaudited accounts simply to avoid a penalty can create significantly greater legal, regulatory and practical issues than accepting the late filing penalty.
At Millet Audit, our general advice is often that it is preferable to file the correct audited financial statements late rather than rush to file unaudited accounts that will subsequently need to be replaced.
The Temptation to File Unaudited Accounts
A common scenario arises where:
- The audit has not yet been completed.
- The statutory filing deadline is approaching.
- The company wishes to avoid a Companies House late filing penalty.
In these circumstances, some directors consider filing unaudited accounts before the deadline with the intention of replacing them with audited accounts later.
While this may appear to be an attractive solution, it can create a number of complications.
Late Filing of Audited Financial Statements: Why Filing Late May Be the Better Option
The Companies House late filing penalty, whilst unwelcome, is often relatively small when compared with the potential issues arising from filing incorrect or misleading financial statements.
By waiting until the audit is complete, the company can:
- File one complete and correct set of financial statements.
- Avoid confusion amongst shareholders, lenders, suppliers and other users of the accounts.
- Avoid creating inconsistencies between the filed accounts and the audited accounts.
- Reduce the risk of regulatory concerns relating to inaccurate public filings.
- Ensure that the directors’ approval process is completed on the correct version of the financial statements.
In many situations, the cost and inconvenience of amending previously filed accounts can greatly exceed the amount of the late filing penalty.
If Unaudited Accounts Are Filed, Extreme Care Is Required
There may be circumstances where directors decide that filing unaudited accounts is necessary. If so, careful consideration should be given to the content of those accounts.
Particular attention should be paid to ensuring that the accounts do not state or imply that they have been audited when this is not the case.
Examples of references that would be inappropriate include:
- Referring to the accounts as “audited financial statements”.
- Including an auditor’s report.
- Including wording that suggests an audit opinion has been obtained.
- Referring to the company as having satisfied its audit requirements through the filed accounts.
Such references may create confusion and could potentially be considered misleading.
The filed accounts should accurately reflect their status as unaudited accounts.
What Happens Once the Audit Is Completed?
Once the audit has been completed, the company will normally need to prepare and file amended financial statements.
The amended accounts should clearly explain the circumstances surrounding the original filing.
This will typically involve disclosures explaining that:
- Financial statements were previously filed.
- Those accounts were filed in error or before completion of the statutory audit process.
- The accounts have subsequently been amended following completion of the audit.
- The amended financial statements replace the previously filed version.
The precise wording will depend upon the circumstances and the nature of any changes identified during the audit.
Late Filing of Audited Financial Statements: Director Responsibilities
Ultimately, responsibility for filing compliant financial statements rests with the directors.
Directors should carefully consider whether the short-term benefit of avoiding a filing penalty outweighs the longer-term consequences of filing accounts that may later need to be withdrawn or replaced.
A modest late filing penalty is often a more prudent outcome than creating uncertainty over the company’s statutory reporting record.
How We Can Help
If your company is approaching its filing deadline and the audit is unlikely to be completed in time, we can help you assess the options available and the associated risks.
Our team can advise on:
- The implications of late filing.
- The risks of filing unaudited financial statements.
- Amendment procedures at Companies House.
- Appropriate disclosures in replacement financial statements.
- Communication with shareholders, lenders and other stakeholders.
Every situation is different, but as a general principle, filing the correct audited accounts is normally preferable to filing an incorrect or incomplete set of accounts merely to avoid a late filing penalty.
Disclaimer: This article provides general guidance only and should not be relied upon as legal advice. The appropriate course of action will depend on the specific circumstances of each company and engagement.
For further advice or support regarding this article please contact info@milletaudit.com
A good source of information is Companies Act https://www.legislation.gov.uk/ukpga/2006/46/contents
Also Companies House https://www.gov.uk/government/organisations/companies-house