When your company’s turnover is reaching the audit threshold, it may be beneficial to consider conducting an early audit.
Although the audit process may seem daunting and time-consuming, there are several reasons why getting it out of the way could help you.
Your audit threshold
A limited company will be required to undergo an audit if meets two of the following criteria for two years in a row:
- an annual turnover of no more than £10.2 million
- assets worth no more than £5.1 million
- 50 or fewer employees on average.
If you’re a charity, you’re required to have an audit if your gross annual income is greater than £1m or you have gross assets of more than £3.26m and a gross annual income of more than £250,000.
Auditing process
The first stage of the auditing process is planning. This will set out the objectives of the audit and how it will be carried out.
The auditor will gather background information and identify risks in the company before meeting you to discuss the planned audit and explain the timetable for the work.
Auditors will conduct interviews with you and any managers. The next step will be a review of your documents and processes, ensuring that the systems and processes are fit for purpose.
At the end of the audit, there will be an exit meeting where any findings are explained and discussed. This gives you the time to raise concerns, and answer any questions your auditor may have.
The final steps will involve a report on the findings and outcomes of the exit meeting. You’ll receive corrective action plans; these will then be followed up during the next audit.
Benefits of an audit
If you know your company is reaching the audit threshold, you should consider starting the process early.
The main purpose of an audit is to verify your company’s financial statements, making sure they are fair and accurate. By doing so, you can be confident that the plans you make are based on accurate data — and that you can actually reach your core objectives.
Audits also help confirm that business risks are properly addressed and managed so you can be confident in your accounting processes.
Financial accuracy and management of risks will be a high priority for potential investors and buyers, as well as board members, so an audit is more than just reassuring yourself of your accounting procedures — it’s about being transparent so key stakeholders can make certain decisions about the company.
Get ahead
By getting ahead and having an audit done early, you can save yourself a lot of time and stress. If you need help starting the process or need advice on how to comply with auditors, the team at Nicholas Peters & Co are on hand to help.