Around one in four small businesses believe that having their company’s annual accounts audited should be mandatory versus around half who disagree. In general, the larger the organisation and the more it wants to grow, the more likely it is to believe that annual accounts being audited should be mandatory, according to the recent study into small and medium sized businesses by the accountancy body, ICAEW.
So whilst opinion varies widely, how can an audit be something of value that business owners can trust and what do some of our clients have to say about HB’s Audit service?
Who needs one?
An audit is an independent assessment of a company’s financial situation. The aim of the audit is to ensure the financial statements show a true and fair view of the company’s financial position and that they have complied with the Companies Act and UK GAAP when producing their financial statements.
Small company exemption
Many UK businesses will not be required to have a statutory audit. For private limited companies, in general, if you hit two of any of these three criteria you will not be required to have an audit:
- Annual turnover of no more than £10.2m
- Assets worth no more than £5.1m
- 50 or fewer employees on average
There are exceptions to this rule, so that a small company is not exempt where:
- Your articles of association say you must have an audit
- Shareholders with more than 10% holding request an audit
- You are a subsidiary company (there are exceptions to this rule)
Companies that must audit
Certain companies, must have an audit, including:
- A public company (PLC) which is trading – not dormant
- A private limited company (Ltd) which is not exempt due to its size
- A subsidiary company (unless it qualifies for an exception)
- A company which at any time in the financial year was an authorised insurance company, a banking company, an e-money issuer, an MiFID (i.e. Markets in Financial Instruments Directive) investment firm or UCITS (i.e. Undertakings for Collective Investment in Transferable Securities) management company
- A corporate body whose shares have been traded on a regulated market in a European state.
- A special register body or employer’s association as defined by specific Trade Union or Northern Ireland Industrial Relations rules.
In all cases, if you are unsure whether your company should or shouldn’t be having an audit talk to our team who will be happy to help.
Why trust an audit?
Most businesses conduct an audit because they must to comply with the law. However, some organisations choose to audit as good practice, even if it’s not legally required, so they know their records provide a true and fair view of their financial position.
Improves accounting systems and controls
Auditors not only review your financial data, they will also identify areas where accounting systems and controls could be improved, making your business more secure and effective.
Gives comfort to shareholders and directors
Many businesses are run by directors who may not be directly involved in the accounting aspects of the business on a regular basis, so an audit can assure those directors and indeed shareholders that their accounts are being prepared in accordance with the rules. An audit can also highlight areas of weakness and provide directors with advice on how to reduce risk and make improvements to the business.
Having an audit, whether you are required to or not, can often give credibility to third party users of the accounts including banks, other lenders and potential buyers/investors. For example, where a business owner may sell within the next three years, it can be advantageous to conduct regular audits.
Provides a foundation for business decisions
Information provided by an independent audit can identify commercial issues and inform strategies which can have a significant impact on the future financial success of the business.
Can be efficient for growing companies
An audit can also be useful when a growing company anticipates reaching the audit threshold shortly, so that once the threshold has been reached it can avoid revisiting the previous year’s accounts.
Overall an audit provides certainty – any problems are discovered early on, legal obligations are met, and accounts are validated as being true and fair.
What do HB clients say about the audit process?
Since the auditing process puts each organisation’s finances and routines in the spotlight it can seem daunting. Yet it needn’t be. Audits can be a helpful event with satisfying results, as many of those we’ve supported will testify.
Audit to meet specialist FCA rules
“Audit can be a very stressful and disruptive time for any business; however, the HB team were a pleasure to have around. They carried out the audit in a very professional, proficient and personable manner, offering support and advice throughout the process. I would highly recommend their services to any business looking for all round accountancy, audit and taxation services.”
Enza Aquisto, Lifetime Group, Hertfordshire, regulated by the Financial Conduct Authority
Independent examination (not full audit) for charity
“As a small charity with some national accountability, we were seeking an experienced but low-cost provider for our audit or independent examination. We have been delighted with the timely and friendly services, and particularly the level of advice and guidance provided by HB Accountants.”
Richard Holland, Family Matters Institute, Bedfordshire
Urgent audit to coincide with office launch
“We have recently opened our first offices and required audited financials with an immediate turnaround time. HB Accountants came to our rescue. Kindly and patiently, they worked with us to get the documents required completed. Not only did we find an amazing new accountancy firm, but we also have found a strong asset in helping us build our company. Their guidance has been invaluable and working with them going forward for all of our accountancy needs has been the best move we have made.”
Kate Cornish, Portunus Investment Solutions, London
Let us support you – click here to find out more
If you’d like auditing advice, we’re happy to help. Or we can take on your audit and guide you through the whole process. However you wish to proceed, just contact our experienced friendly team by calling 01992 444466 or email firstname.lastname@example.org