While many perceive an audit as a fulfilment of obligations under the Companies Act, an audit can reveal enlightening information regarding your business’s operations.
Regardless of your business’s scale or kind, an audit can disclose pivotal information about your financial position, regulatory conformity, and overall performance.
What is an audit?
An audit involves an impartial and systematic review of a company’s financial statements, records, and operations.
It offers an objective perspective of the company’s fiscal health and confirms the fairness, precision, and clarity of financial data shared with stakeholders.
An audit endeavours to answer a core question: Do a company’s financial statements accurately and honestly represent its financial performance and position?
What are the different types of audits?
The three types of audits that businesses will encounter are financial audits, compliance audits, and operational audits.
Financial audits: These primarily verify the accuracy of a business’s financial statements. They also evaluate compliance with relevant accounting standards such as International Financial Reporting Standards (IFRS) or UK Generally Accepted Accounting Principles (UK GAAP).
Compliance audits: These audits ascertain whether a business complies with legal guidelines and regulations, such as tax compliance, health and safety rules, or sector-specific regulations.
Operational audits: These are performed to examine a business’s operational efficiency and effectiveness. This may involve scrutinising the performance of a particular division, the effectiveness of internal controls, or the triumph of a business strategy.
Is a financial audit necessary for your business?
In the UK, it is not compulsory for all companies to have their financial statements audited.
Under the Companies Act 2006, smaller enterprises are generally exempted from mandatory audits, unless they are within a larger group of companies.
In general, businesses fulfilling two of the subsequent requirements for two consecutive years must conduct a statutory audit:
- Annual turnover exceeding £10.2 million
- Assets totalling over £5.1 million
- Employing more than 50 workers
How could an audit help your business?
A voluntary audit can pinpoint improvement areas and guide decisions to boost your business’s performance.
An audit extends beyond being merely a regulatory compliance tool—it is a mechanism for enhancing business transparency, credibility, and sustainable growth.
They ensure accountability, aid in adhering to regulatory necessities, and can aid in identifying potential weaknesses.
A voluntary audit can be beneficial if you aim to draw investment or secure loans, as it provides confidence to stakeholders about the company’s financial standing.
If you would like to know more about our audit services, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494 552100.
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 28 July 2023.