Facing your first financial audit can be intimidating, yet it is an essential task for many businesses.
Why are you being audited?
Understanding the purpose behind your audit is the first step. Audits generally occur for three primary reasons:
- You are legally mandated to have one.
- Current or potential business partners request it.
- You seek an audit for your own assurance.
Voluntary audits
If you’ve chosen to undergo a voluntary audit, determine whether you are reviewing your business’s future or assessing its status up to this point.
Voluntary audits can be conducted at any time and are particularly useful if you rely on a management team.
They can also be helpful if you are considering selling your business or are looking for investment opportunities as they can provide an accurate financial reflection of your company.
Mandatory audits
Your company might be legally obligated to conduct an audit based on its size and annual turnover.
If at least two of the following apply to your business, you must have an audit:
- Annual turnover exceeds £10.2 million
- Total assets are £5.1 million or more
- Over 50 employees
This must be completed by an independent registered auditor, but someone from your company may need to assist the auditor by providing all necessary information for an accurate assessment.
Best practices for a smooth audit
Audits can be stressful, especially if you’ve never done one before, so follow these tips to ensure a smooth and successful process:
- Collate your documents – Maintain thorough documentation of how you manage financial transactions. This includes keeping receipts and invoices. Where possible you should digitise records to minimise the risk of misplacing them, or potentially losing them to a fire.
- Start early – Draft your accounts in advance, along with any director’s or strategic reports. Address any unusual transactions promptly instead of waiting until year-end.
- Plan ahead – Schedule the audit at a time when your team is not overwhelmed or on leave. Your key finance team members will likely need to be available to assist the auditors without disrupting their regular tasks.
- Be responsive – Auditors may have additional questions if initial documentation is insufficient. If you don’t answer these questions promptly it will lead to delays in the completion of the audit. You should prepare yourself to answer these questions clearly to avoid any misrepresentation.
- Ask questions – Review the full ‘Prepared by Client’ list provided by your auditor and seek clarification on any unclear items. Remember, they are there to assist you. Your questions prior to the audit will also benefit the auditor, as it should reduce any issues later in the process helping it run smoothly.
If you still have concerns about your financial audit and would like assistance, our team are here to help.
Please get in touch today to discuss how we can assist you.
