Many UK businesses must have a statutory audit; generally, those who meet any two of the following criteria:
• where company turnover exceeds £10.2 million;
• where total company assets exceed £5.1 million; or
• where the company has more than 50 employees.
Companies below these thresholds are usually termed ‘small’ companies and typically exempt. However, other factors can still necessitate a statutory audit. For example, being part of a group that is not small or if your company/group is ineligible for exemption due to its activities (i.e. financial services companies).
The members of a company can also request an audit; if more than 10% do so, the request must be fulfilled.
Why opt to have a voluntary audit?
If your business is currently exempt, you may question why you would opt to have a voluntary audit carried out.
This is compounded by the fact that 25% of UK respondents say that they do not understand the role of an auditor; this is according to a survey by the Association of Chartered Certified Accountants (ACCA).[1]
An audit is not only beneficial for those organisations bound by law to have one, though. It can also be a useful exercise for go-getting, fast-growing businesses.
An audit is much more than just a compliance service. Though the primary objective is to conclude whether or not the financial statements represent a “true and fair” view, to do so an auditor must assess a company’s wider operations.
Audit and added value
The risk of fraud within a business, as well as the robustness and operating effectiveness of internal systems and controls, are key interests for auditors.
Objective scrutiny adds value to the audit process and can help management to reduce the risk of fraud and inconsistencies. The auditor will produce a report, which will identify weaknesses and suggest improvements.
Substantive testing can also identify errors or irregularities within the accounts and highlight wider issues associated with cut-off or stock valuation, for example. These issues, if left, could impact upon the management information a business may be relying upon to inform strategic decisions.
With new technologies and methods, such as data analytics, no longer confined to the big four firms, an audit may include some testing on a company’s entire data population. This is in contrast to more traditional auditing that focuses on a sample.
Audited financial statements improve the credibility of figures, which can be a comfort to interested parties (banks, shareholders etc.). Audited accounts are also beneficial for a business looking to sell, giving assurance to prospective buyers.
Fast-growing businesses can benefit
Fast-growing businesses, though maybe exempt from audit now, can quickly exceed the thresholds that were outlined earlier. Familiarising yourself with the process sooner, therefore, can be advantageous.
How can George Hay help?
Whether statutory or voluntary, our audit specialists can help you to meet your obligations.
We turn what many business-owners view as a ‘regulatory burden’ into a useful review of your financial statements. In turn, this can be invaluable when it comes to decision-making and forward planning.
We will keep you informed throughout and we will deliver audit and management reports designed to help you improve your business and internal controls.
To speak to us about how your business can benefit from a voluntary audit or if you know you are required by law to have one and are not sure where to start, contact us today.
[1] ACCA (2019) Closing the expectation gap in audit <https://www.accaglobal.com/content/dam/ACCA_Global/professional-insights/Expectation-gap/pi-closing-expectation-gap-audit.pdf> accessed on 18 July 2019.
