Company audits can be a complicated process
if you have never been through one before and you may have a lot of questions about the audits and the auditing process.
At Wisteria we have several years of experience of processing company audits for a wide range of companies in different sectors and different sizes. We have pulled together this useful FAQ which answers some of the most common questions about audits. However, if you have any additional questions please get in touch by calling us on 020 8429 9245
and we will be happy to answer them.
Does my company need an audit?
Companies that qualify as small under the Companies Act 2006 are usually exempt from audit. A company will be considered small if for both year and prior it was not ineligible and meets 2 out of 3 of the following conditions
- Turnover less than £10.2m (ii) Total assets of less than £5.1m (iii) less than 50 employees.
If your company is a subsidiary it may be entitled claim exemption from audit if certain criteria is met and the parent company provides a guarantee of all outstanding liabilities at the end of the financial year.
The rules regarding audit exemption are quite detailed and beyond the scope of this article so you should consult with your accountant.
What is an audit?
In simple terms an auditor will express an opinion on the financial statements as to whether they give a true and fair view. They are not stating that they are 100% correct but are materially correct. If they do find any material errors and these are not adjusted for then this will impact on their audit opinion.
Who can perform an audit?
Only a firm of registered auditors can perform an audit. One can check if a firm is registered to carry out this work by going to the following website www.auditregister.org.uk
What is the benefit of an audit?
Although your company may qualify as small there are still benefits of an audit, these can include:
- Where the shareholders are not involved in the day to day running of the business an audit can help provide them with assurance regarding the financial statements the directors have prepared.
- An audit will help identify weaknesses around the accounting system and controls and the auditor will suggest improvements.
- If you are looking to sell your company then audited financial statements will add credibility to the figures provided to any prospective purchaser.
- A company’s credit rating may be affected by not having an audit which could impact when it comes to obtaining credit from suppliers or obtaining finance.
How much will an audit cost?
That’s a difficult one to answer simply because each firm will have different hourly rates but also depending on the nature and complexity of the transactions the time taken to review how these have been accounted for will also vary.
If you are preparing the financial statements then they will also check that certain disclosures have been made in accordance with company law and accounting standards.
How can I prepare for an audit?
You should ask your auditor to provide you with a schedule of information to prepare ahead of their main audit work. They will want evidence to support transactions and balances included within the financial statements, for example a bank statement or supplier statement at the year-end date.
How can I find out more?
Please contact Wisteria Limited, Chartered accountants and registered auditors
, on 0208 429 9245