Not all businesses require a statutory audit. If your private limited company has an annual turnover of less than £10.2 million, assets that are worth no more than £5.1 million and fewer than 50 employees, you may be exempt from an audit.
However, a business of any size can choose to commission an audit and this can be a great investment.
There are many reasons why a company should consider commissioning a voluntary audit of their business and its finances. Here are my top five.
1. It gives assurance to your investors
You may consider a voluntary audit to offer additional assurance to shareholders, investors, banks and other financial institutions.
In some cases, having an audit will be a requirement of a loan you have received from a bank or other lender. A clean audit report could also help if you are considering accessing finance in the future.
When it comes to family-owned businesses, shareholders aren’t necessarily involved in the day-to-day running of the company. An audit will help to provide assurance to shareholders that the business is recording transactions as it should, in line with defined accounting standards.
It is important for businesses to be transparent with their auditor. The auditor is not there to judge individuals’ performance, but rather to support and guide the company, while maintaining an independent perspective.
2. It provides you with independent external scrutiny
An audit also provides evidence of independent external scrutiny, which will then be publicly available.
In theory, a voluntary audit will demonstrate that a business is reliable and more trustworthy. Auditors adhere to strict international standards to ensure the process is rigorous and independent.
A clean audit report can make a business more attractive to investors or equity firms.
3. You will get advice on controls and systems
Often in small businesses, people are so busy carrying out the tasks needed to run the business that they don’t have time to look closely into the way they work.
An audit can offer independent advice on controls and systems, particularly when these may impact on financial statements.
As auditors, we can use our experience to recommend ways in which the business can become more efficient and cost effective, as well as offering comparisons with other organisations’ working practices within the same sector, aiming for a best-practice approach.
4. It could reduce risk and the potential for fraud
While business owners often know their sector incredibly well, they don’t always anticipate potential risks.
An audit can help the management team to focus on potential risks and plan to mitigate any potential risk to the company’s future. Putting such a strategy in place does not require a huge amount of work, but its value will come into play should the worst happen.
An audit can also help a business mitigate against potential fraud, by focusing on areas where the company might be susceptible.
Cyber security is a growing problem, but more traditional ways of defrauding a company still occur. At Thomas Westcott, we have seen a case of someone defrauding an organisation using cheques, and mandate fraud, where an employee is tricked into changing a regular payment to a fraudulent account, is still common.
Undertaking an audit can help identify risks and any unusual financial activity, helping ensure you have the right checks in place to avoid fraud.
5. You will get advice on financial processing
By commissioning a voluntary audit, you can also receive advice on the efficiency and effectiveness of the financial processing and reporting functions of your business.
Many businesses have moved over to cloud accounting, but a lot of their other processes haven’t moved with the times. This can include invoicing, which in some cases is still paper based.
Using one of the many different reporting systems available in your day-to-day business can save you time, effort and money. Programmes like this can be edited to work best for your organisation and target specific areas, providing data that is useful to you.
An audit can also analyse your financial processes, ensuring that work is not duplicated and that chains of authority are followed.
At Thomas Westcott, we have seen time and time again, the real value an audit can bring to any organisation – large or small. Whether the audit is statutory or voluntary, it will provide a valuable independent assessment of your financial statements, structures and controls.
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