Why should you have an Audit of your Financial Statements?
Lambert Chapman LLP is a firm of Chartered Accountants and we are regulated to offer Statutory Audit services. We are committed to retaining our Audit status in order to provide the full range of services to our clients some of which legally require an Audit and others may “opt-in” for this service which provides a greater level of assurance over the Company Accounts compared to an accounts preparation assignment.
We have four Responsible Individuals (RI) that are able to sign an Audit Report and other regulated work which requires an audit qualification. This work includes client money audits for solicitors and FCA regulated clients, grant claims and Co-operative and Community Benefit Society companies.
We do recognise that some directors consider that a Statutory Audit is a necessary evil but I challenge those thoughts because an audit can provide valuable information about the business when approached in the correct way. We would be happy to meet with prospective clients to discuss our audit process to show that there are positives to receiving this service.
Business Benefits of an Audit
- An audit includes the review of systems and the testing of transactions on a sample basis which can help to identify areas of weakness and areas that may have a higher susceptibility to fraud or error. At the end of the audit, we provide a summary of weaknesses to the Company so that management has an opportunity to make their systems more robust. One such control is the segregation of duties between employees. This may not always be possible to implement for all businesses but is an excellent way to help prevent fraud.
- For companies where the main shareholder is not involved in the day to day running of the business, it can provide a greater level of comfort over the accuracy of the figures compared to a non-audit assignment. It will give Stakeholders in the company greater confidence in the financial position of the company including customers, suppliers, employees, banks and of course shareholders.
- Fast-growing businesses would benefit if it is likely that they will breach the audit thresholds quickly so that the previous year does not need to be revisited during the first year of an audit.
- If you are looking to sell the company in the next few years then having an audit would be a sensible choice in the years leading up to the sale as a potential purchaser may be more confident in the results when it comes to placing a value on the company.
Current Audit Thresholds and Exemptions
The requirement to have an audit within the UK is mainly linked to the small company thresholds which are:
- Turnover <£10.2m
- Gross Assets <£5.1m
- Employees <50
To qualify as a small company and be entitled to audit exemption you must satisfy two out of the above three criteria and you must not have been a medium or large company for the previous accounting period.
There are some companies that are required to have an audit even though they may be small in their own right. These companies are those which:
- Are part of a medium or large group of companies even if the other companies within the group are not based within the UK.
- Are part of an ineligible group such as those with a listed plc or where another group company is ineligible due to its FCA regulated activity. Although as part of the latest rule changes a non listed plc would itself require an audit it no longer means that the whole group automatically needs an audit provided the group meets the small group size criteria.
For businesses that are currently classed as small but in my opinion are still very good sized business, it does now mean you have further flexibility to opt for a focussed assurance assignment rather than an audit if you choose to. This allows the Company to request a more detailed look at areas that they consider to be of higher risk. For example, the Board may be completely happy with all areas of the business and have good controls but they may consider that stock is a higher risk area that they would like to receive additional comfort over. With an assurance assignment, Lambert Chapman LLP
In circumstances where additional Scrutiny over your Accounts is required whether that be a full Statutory Audit or an Assurance Assignment then we will offer you the advice for the most appropriate level of work for your circumstances.
Making life simpler for you
We recognise that our clients are busy running their business and so where our clients are subject to the Audit regime we work with them to ensure that the whole process is carried out as smoothly as possible with minimal disruption. Our clients have thanked us for the way we conduct the Audit and the questions that we ask whilst reviewing their systems can lead to improvements for the future.
If you would like to discuss the requirements for a Company
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.