Few people relish the thought of an audit for their business or charity, especially if it is the first they have experienced. Knowing what to expect, though, takes away the fear of the unknown. So here is a quick guide to what’s involved, plus how we can help.
What triggers an audit for a company?
Most small businesses will find themselves exempt from an audit, due to accounting thresholds. This means that so long as your business clears any two of the following thresholds, an audit is unlikely:
- Your turnover is equal to, or lower than, £10.2 million
- Your total assets are equal to, or below, £5.1 million
- You have 50 employees or fewer.
There are a few exceptions, especially for companies operating in the financial services sphere, or where shareholders owning at least 10% of the company request an audit in writing. They must do this within at least a month prior to the close of the relevant financial year.
What triggers an audit for a charity?
As you may know, a charity’s accounts begin to come under greater scrutiny when their gross income exceeds £25,000 (unless its own governing document is more onerous).
When your gross income is between £25,000 and £500,000 an independent examination will generally be required. Anything over £500,000 means an audit is mandatory.
A further trigger for an audit of a charity is where total assets (before liabilities are counted) are in excess of £3.26 million and gross income is above £250,000.
What is involved with an audit?
Every audit is a bespoke procedure depending on the organisation, but there is a general approach which will usually be followed. Typically this will look like:
- Auditors meeting with key stakeholders to request general information
- Setting the parameters of what will be examined
- Designing a plan based on the circumstances of the organisation
- Carrying out the fieldwork
- Reviewing the audit results with the key stakeholders
- Delivering the audit report.
How we can help
We believe that a tailored approach is required in order to perform a high-quality audit. Only in this way can we deliver an excellent service to suit any organisational type or structure. We minimise the impact on day-to-day operations by working discreetly, and are always looking for opportunities to help you improve through our findings, following the audit.
Benefits of an audit
On that final point, it should not be overlooked that as well as delivering financial rigour, an audit is an opportunity to leave your organisation in a stronger position than it was in before the audit took place.
It may uncover risks that you had previously not realised you were exposed to, reveal procedural inefficiencies on the one hand, or new opportunities on the other – all of which can be acted upon to help you grow sustainably. And do not forget the peace of mind that an audit will give to managers and especially shareholders, by giving an independent evaluation of the state of the company.
Find out more about our audit service
If you believe your financials are leading you close to requiring your first audit, or you have already had one but would like to explore how we could help you with your next audit, please do not hesitate to get in touch. We will be happy to help.