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Annual audit fees can often be substantial. However, in terms of reducing the overall cost of an audit you need to understand what is involved in the audit and what you can do to substantially reduce the amount of work carried out by the auditors thus providing an opportunity to reduce the likely fees. Essentially the auditor needs to carry out a number of tasks and in order to do these the auditor needs information: 1) Understand the balance sheet and obtain evidence for each material account 2) Choose samples of transactions from the P&L and confirm that they have been treated correctly 3) Check cut off 4) Establish if the company is complaint 5) Check if the controls and systems are adequate and working 6) Establish if the company has sufficient prospects 7) Check accounting treatment 8) And many more things Information In order for the auditor to start their work they need information. The back and forth of requesting and chasing information can take at least 10% of the time involved of the entire audit. Therefore, if you can provide all the information ahead of when the audit starts then this allows the audit team to commence and progress without the need to keep stopping and starting. I propose that you set up a secure depository in the cloud and collate and organise your records. Within the depository set up some directories such as: • Management accounts for the year and after • Trial balance and journals • Bank statements and mandates for the entire year and since the year end • Purchase invoices for the year and after • Sales invoices for the year and after • Payroll monthly reports; employment contracts and other related matters • Staff hiearchy • Fixed assets register and workings • Stock take and workings • Trade debtors and provisions • Other assets • Trade creditors • VAT • Corporation tax • Other creditors • Share capital and reserves • Board and management minutes for the year and after • Insurance policies • Articles of association, registers and other company secretarial matters • Share structure and group structure • Claims and disputes – summary and any correspondence and documents • Lease and any delapidations calculations • All significant agreements • Regulatory matters such as licenses, ICO certificate etc • Funding matters • Forecasts and budgets • There may be others that you believe are relevant Although the above looks like a lot of work, which of course it is, this information is going to have to be provided and collated at some time. By doing it ahead of the audit and committing to do so allows you to negotiate fees. About the Author – Andrew Millet BA MBA FCA Andrew is responsible for the Accounts and Audit departments, as well as Business Consultancy. His clients vary in size from £1m to £30m turnover. Andrew has over 25 years’ experience in commerce and practice. After qualifying with Stoy Hayward (now BDO), Andrew moved into industry. Andrew gained commercial experience operating as a CEO and CFO of numerous successful companies in biotech, recruitment, media, technology and marketing. www.wisteria.co.uk [email protected] +44 (0)20 8429 9090
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