Which statements describe how a company can be considered dormant for audit purposes?

• A. Dormant since incorporation; or dormant since end of the previous financial year, small and not required to produce group accounts; and if dormant, but a bank or insurance company, still requires audit.
• B. Dormant since the last financial year end only if there have been no transactions at all.
• C. Dormant status has no impact on audit requirements.
• D. Dormant companies always require an audit.

Answer: (A)

Dormant for audit purposes means the company has had no significant accounting transactions in the period, so it may qualify for audit exemptions under the rules that apply to small or dormant entities. A company can be considered dormant from incorporation or from the end of the previous financial year if there have been no significant transactions since that date. If the company is small and not required to prepare group accounts, it may not need to produce group accounts, reflecting reduced reporting obligations. However, certain entities such as banks or insurance companies must be audited regardless of dormancy due to regulatory requirements. So the description that matches these points captures how dormancy interacts with audit needs: it can apply from incorporation or from the end of the last year, for small entities not needing group accounts, with audits still required for banks and insurers.