Find out more about external audit requirements for MiFID investment firms, including what you need to do.
Incorporated entities (a limited liability company or limited liability partnership) regulated by the FCA
Accounts audit (Companies Act)
Under the Companies Act legislation you are required to appoint a statutory auditor who performs an annual external audit on the firm's accounts.
However, you are not required to appoint a statutory auditor who performs an external audit on the firm's accounts if:
- you meet the Companies Act criteria for the small companies audit exemption
- and you are eligible for the article 3 MiFID exemption (even if you are not authorised as an article 3 exempt firm). The conditions for eligibility are set out in regulation 6(3) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017.
The small companies audit exemption is available if at least two of the following criteria are met:
- the annual turnover is not more than £10.2m
- the balance sheet total for the year is not more than £5.1m
- the company has 50 or fewer employees on average
Client assets report (FCA rules)
If your firm falls within a category listed in SUP 3.1.2R[1] you are required to appoint an auditor who must report to the FCA on your firm’s client assets. Please also see the Client asset report[2] page.
Unincorporated entities (sole traders or partnerships) that are MiFID investment firms
Accounts audit
If you are an unincorporated entity (i.e. you are a sole trader or a partnership) and a MiFID investment firm, you must have your annual accounts audited under SUP 3.1.2R(7D).
Client assets report (FCA rules)
If your firm falls within a category listed in SUP 3.1.2R[1] you are required to appoint an auditor who must report to the FCA on your firm’s client assets. Please also see the Client asset report[2] page.
Own funds calculation (FCA rules)
Firms also need to be aware of rules in the FCA Handbook[3] relating to the calculation of own funds (capital) resources which require independent verification (eg, the Application under MIFIDPRU 3.3.2R) even if no Companies Act audit is required.
