As your company grows there will come a time when regular audits or assurance reviews are necessary. Most people get anxious when they know they are getting audited. However, you don’t have to feel this way as independent audits exist to increase the credibility of your business.
What is an audit?
An audit is an independent examination and evaluation of your company’s financial records. The objective of an audit is to confirm the company’s records are correct by making sure the books accurately represent all business transactions.
Who needs audits?
The Companies Act 2006 states that a company’s annual accounts for a financial year must be audited unless the company is exempt from audit (s475). There are four potential ways to obtain audit exemption:
- If the company is a small standalone company
- If the company is a small member of a small group worldwide
- Any sized company in a UK or EEA (European Economic Area – applicable for year ends up to 31 December 2020) group with a parent guarantee
- If the company is dormant
Each of these potential ways to obtain audit exemption contains its own requirements and conditions which can be explored at the ICAEW website. It is suggested you investigate these requirements prior to making your decision.
Generally, to qualify as a small company in size, companies which are not parent companies need to meet 2 or more of the following criteria:
- The company has an annual turnover of less than £10.2 million.
- The company assets are worth less than £5.1 million.
- The company has less than 50 employees.
If you do not meet the requirements – you can still choose to undergo an audit. Audits help to provide constructive feedback on how the company is performing, allow for value-add conversations to take place and help to increase credibility with investors and stakeholders.
What is the audit process?
In short, the audit process entails an experienced team conducting thorough research about the company, reviewing financial documents and confirming the company’s financial position.
The audit report:
At the completion of the audit an official audit report is issued. If there are no major issues, the audit report is deemed as unqualified. All companies should strive for assurance which means that the companies financial documents, and sometimes other business operations have been thoroughly reviewed.
Want to help your business grow and improve?
Here at FLB, we have a highly qualified and experienced audit team based in Reading, London, and Epsom. We provide the expertise, skills, and experience necessary to support clients from start-ups, owner managed businesses and private clients to large corporates and international businesses.
If you’d like to find out more or explore our audit services further, reach out to the team here and an experienced member of our specialist team will be more than happy to help.