3rd August 2017
What is an audit?
In simple terms, an audit is the process of assessing a set of company accounts to determine if they are accurate and an honest representation of the company’s affairs.
All private limited companies are subject to an annual statutory audit if they do not meet at least 2 out of the following 3 conditions:
- has turnover of less than £10.2 million
- has total assets worth less than £5.1 million
- employs fewer than 50 employees.
The audit process is usually carried out by a qualified accountant, who will also be a registered auditor. The auditor is responsible for examining your company’s accounts and financial statements and making sure they are compliant with regulatory authorities, such as Companies House and UK GAAP.
Before the auditor commences with an audit, they must fully understand the company – from its industry sector and regulations to objectives, strategies and policies in place.
There are 4 key stages to an audit:
- designing and planning the audit
- testing financial controls and evaluating the recording of transactions
- analysing financial records and making sure they add up
- issuing an auditor’s report.
Some companies will undergo a non-statutory audit to ensure their accounts are accurate and in line with legal regulations. This can help provide comfort to your investors or shareholders that your accounts are financially sound and that the company is meeting its regulatory requirements. External funders, such as banks, or potential investors may require an audit for similar reasons.
As part of the audit process, the auditor will also report to management on the quality of internal controls maintained, identify where weaknesses exist, and provide recommendations on how these can be improved – valuable feedback for any company, whether large or small.
Whatever the reason, there are many benefits to having externally audited accounts. If you would like more information on audited accounts or would like to discuss your audit requirements, please contact us on 0141 221 257 or email email@example.com to find out more.