As your business expands, reaching certain milestones might necessitate that an external audit is required.
In the UK, the majority of standard private limited companies are legally required to undergo an external audit when two of the following criteria are met for two consecutive years:
- Your turnover is more than £10.2 million
- Your balance sheet (i.e. assets) is more than £5.1 million
- You employ more than 50 staff
Additional considerations must be made if your company is part of a group of companies as this may require it to have an audit regardless of its size. Likewise you will need to be below the thresholds for two consecutive years before an audit will no longer be required.
If you do not meet this criteria, you may still choose to conduct an external audit for various other reasons. This may be to add an extra layer of confidence in your financial statements, if you are considering a business sale, or if it’s a requirement of your stakeholders or banking facilities.
What does an audit entail?
We will review and walkthrough your internal controls to pinpoint any weaknesses that could lead to significant errors in your financial data. Our goal extends beyond just validating financial statements; we aim to provide insights into your reporting mechanisms and processes to help strengthen controls and avoid future errors in reporting.
To enable us to conduct the audit, you’ll need to provide financial statements, records of assets and liabilities, and details of expenditures and income (detailed overleaf). It is our job, as your audit team, to scrutinise these documents for accuracy and compliance. We typically do this through sample testing, verifying a selection of transactions back to underlying support, covering all areas of the financial statements.
What are the benefits of an audit?
- Trust and credibility: An audit enhances the reliability of your financial statements among investors, lenders and other stakeholders.
- Compliance assurance: An audit ensures your financial reporting meets statutory requirements and standards.
- Risk management: The process identifies weaknesses in your financial controls and systems, offering opportunities for improvement.
- Our deep dive into your business operations during the audit fosters a comprehensive understanding, enabling us to offer tailored advice for improved efficiency and compliance with the latest tax and accounting standards
Our audit approach
Planning the audit approach
Your engagement partner will arrange to meet with you to understand your business, your industry, and specific challenges. We will then plan our approach, outlining individual responsibilities so that we are all on the same page from the outset.
Documenting and testing
Next, we commence the fieldwork. This will involve examining financial consistency through document testing and analytical review, incorporating the latest regulations and standards.
The Auditor’s Report
Finally, we will discuss our findings with you. This includes producing a comprehensive report that includes our audit opinion and recommendations.
What do I need to provide as part of an audit?
- Financial Records: Comprehensive records of your accounts, including sales, purchases and expenses.
- Bank Statements and Reconciliation: Documentation proving your reported financial position matches your actual bank balances.
- Assets and Liabilities: Detailed records of assets owned and debts owed at the year-end.
- Payroll Records: If applicable, to verify employee numbers and related expenditures.
How can we help?
The earlier you seek advice, the longer you will have to prepare for an audit. If you are moving towards meeting one or more of the criteria, please do get in touch to discuss whether an external audit may be required for you and your business. Contact Fred Norman, Head of Audit, via the below.
Fred Norman
Head of Audit
T: 0161 905 1616
E: fn@haroldsharp.co.uk