Not all businesses need audits. Depending on the size and turnover of your company, you may be legally required to undergo one, but in some cases, an alternative could prove just as helpful.
If you’re wondering whether your business needs an audit, here’s some useful advice.
When you might need an audit
There are a few reasons why a company might need an audit. Usually, an audit will take place once you reach the threshold criteria. You’ll be legally required to have an audit if you:
- have more than 50 employees in total
- an annual turnover of £10.2 million
- gross assets over the value of £5.1m.
If you’re a smaller company that doesn’t meet two of these criteria, you may still have to undergo an audit if shareholders owning 10% or more of your company’s shares formally request one.
Although assurance and audits are usually mentioned in the same breath, the two are very different.
While assurance reporting, much like auditing, will involve analysing financial statements, the process and scope are far more limited. The main difference between the two is the key purpose.
Assurance reports aren’t meant to correct any issues found in a company’s accounting records. They’re used to measure company compliance concerning accounting standards and principles.
That said, the person carrying out the assurance review will provide opinions on any areas they see may require improvement, but only as a suggestion for your business to look into further.
The primary aim of assurance is to ensure your company’s financial reports are accurate and to check there isn’t any fraudulent activity.
Benefits of assurance reviews
Although assurance reports provide less specific detail on the overall running of your financial processes than an audit, there are extra benefits.
Firstly, they provide proof that an independent body has reviewed your accounts. But, because less work is involved, it’ll take less time than a full audit and won’t be as disruptive to your day-to-day.
Secondly, your in-house team will know that an outside observer will still check their work, hopefully acting as a further deterrent for fraudulent activity.
Assurance reports aren’t the only way for your business to tighten its financial reporting.
Hiring an independent and experienced accountant to prepare your accounts is also an effective method of collating your financial information.
When using an accounts preparation service, you’ll share your figures with your accountant, who’ll then prepare financial statements that comply with all relevant statutory requirements.
Unlike an audit, both accounts preparation and assurance reviews aren’t regulated services but rely on the experience and skill of your accountant. That’s why it’s important to employ the services of a trusted firm (just like us).
We’re here to reassure you
A lot of smaller businesses won’t need to undergo a full audit. Instead, there are other methods of ensuring you’re handling your finances properly. We’ll look at your accounts to provide you with the peace of mind of knowing you’re compliant and things are running smoothly.
Get in touch to discuss your accounts.