There are so many benefits to having your business independently audited. Even if your business doesn’t fall within the audit threshold for requiring an audit, there are still many factors to consider how an external audit could benefit your business.

Does my business need to be legally audited?

There is a statutory requirement for medium and large companies to have an external audit. If your company breaches two of the following three thresholds, then an audit will be required in the second year it is breached:

Turnover: Greater than £10.2m

Number of Employees: More than 50 employees

Balance Sheet Total (Gross assets): More than £5.1m

There are other factors that need to be considered as to whether your company has a statutory requirement to have an audit, such as the company being part of a group or in certain industries.

Irrespective of the above thresholds, we have many clients who still chose to have an audit because of the advantages an audit can bring to the business and the business owner.

What does an audit cover?

An external auditor will collect, assess, and interpret data to gain an understanding of the organisation’s activities. For each major activity listed in the financial statements, external auditors will have to identify and assess risks that may have a significant impact on the organisation’s performance or financial position.

Having an external auditor checking the accuracy of your internally generated management accounts and highlighting systematic errors throughout the year can ensure that mistakes are not continually made.

What are the advantages of an external audit?

Why would you choose to have an audit if you aren’t legally required to do so?  An external audit can help a business owner and a business in the following ways:

Provides credibility – Having an external auditor verify your financial statements will add credibility to the company. If you’re looking to raise funds for growth or are beginning to plan to sell your business, then having audited accounts will make it more likely that you will achieve your goals.

Improves internal systems, processes, and controls – Auditors don’t just focus on your numbers and finances. An auditor will gain a deep understanding of your business, making them well placed to look at your business with a fresh pair of eyes. They will look at systems & processes and make recommendations for changes or improvements.

Identify weaknesses & risk in a business – Often an audit will identify weaknesses and risk in a business. This will then allow you to take preventative or corrective action.  Auditors should have a commercial perspective and not only look at finances but be able to identify issues in things such as contracts, over dependencies or weaknesses in processes and systems.

Gives you a platform to make commercial decisions – You can use an audit and the report and advice you receive post audit to help you to make decisions now and in the future. That could be decisions on changes in processes, systems, or controls. You could use an audit and its results and recommendations as the business case for change to other directors or your management team.

Identify fraud – Often auditors can identify fraud within a business. If your business has multiple directors, then it’s a great way to have all directors and staff accountable and you can minimise fraud when people in the business know there will be an independent review of the figures.

Give shareholders confidence – If your business has multiple directors, then an external audit provides shareholders with an independent review of financial statements. This in turn can give shareholders in the business peace of mind and confidence that there are no issues or fraud and that the company is being well run. If some shareholders are not involved in the day to day running of the company, this kind of reassurance can be crucial.

Increase the value of your business – Business value is affected by many areas and things like systems and controls are vital to grow a company and increase its value. Minimising risk in a business will also add to its value and an audit can provide help to improve these areas and increase business value.

What is the impact of the audit on a company?

An audit doesn’t have to be a disruptive process and should be collaborative for all involved. The impact of undertaking the audit process shouldn’t be significant.

Here at Barnes Roffe, our audit approach is clear and comprehensive communication and planning. We agree up front our timetable, which can be built around you, and process and plan the audit carefully to focus on the key areas.

We ensure we discuss any issues that arise as they are identified as we undertake the audit to ensure there are no ‘surprises’ at the end of the audit. We aim to help you achieve a timely resolution of reporting matters.

Summary

If you want the best level of assurance over your financial statements or need to provide reassurance to shareholders or potential funders, then an audit should be considered. A well run, focused audit can provide peace of mind to owners, directors, investors, and potential buyers. It allows you to know that an unbiased third party is making the thorough checks on the business to minimise risk, improve systems and processes and that financial reporting is correct.

If you’d like more information about how an audit can benefit your business, contact us.