A Company has a duty to keep records of its accounts giving a 'true and fair view' at the end of each financial year. There is a general duty to appoint an auditor to review those accounts independently. An auditor must be a person suitably qualified (i.e. a certified or chartered accountant), and must be independent.
An auditor must be appointed before the first annual general meeting, and this is often done at the first board meeting. However, an auditor need not be appointed by companies with a balance sheet of not more than £1.4 million, and a turnover of not more than £1 million.
In these circumstances, instead of appointing an auditor, the directors must give a declaration that the accounts are a 'true and fair view' of the company's position.