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Do small or medium-sized businesses need an audit?

The laws around audits are complex and while many of the UK’s largest businesses are required by law to complete regular audits, many smaller and medium-sized firms may not have to.

However, just because there isn’t a legal requirement to complete an audit doesn’t mean that these firms should forego them altogether. 

Audits can provide valuable information about a business, help to improve financial functions and internal controls and assist business owners in spotting potential risks. 

An audit involves a thorough examination of a company’s financial statements and can not only be used to assist with the issues above but may be used by a company to prove to others that a business’s financial position is strong and its practices sound. 

Here are some reasons that a small or medium-sized business may benefit from carrying out an audit: 

  • Loans – If a business is trying to obtain a loan it is a common lender requirement for an audit to be conducted to help determine a company’s eligibility for funding or credit. Although not required for every lender, seeking out finance with an audit may make obtaining a loan easier and lead to lower interest rates. 
  • Selling a business – Conducting an audit before a sale can make the entire process easier. The information provided via an audit can provide buyers with a clear picture of a company’s finances, which may even help owners to demand a higher price, as less risk is involved in the transaction. 
  • Partnerships and LLCs – Financial audits are often required as part of a business’s Partnership or LLC agreement and so must be conducted when a business changes to this structure. 

If you are looking for advice on audits, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 19 July 2021.