Your annual audit should be seen as more than just a box-ticking exercise. It is a process that can add value to your business in many ways.
What is an audit and why is it needed?
An audit is the independent examination of an organisation’s financial records, which includes a review of risk management procedures, internal controls, and compliance with legal and regulatory requirements. The auditor will produce a report for inclusion within the financial statements and may also report to the directors with recommendations for improvement.
The goal of an audit is to provide assurance that your company is managing its risks effectively and that its financial statements are accurate. Mandatory audits are required by law while voluntary audits are conducted at the discretion of a company.
How valuable is an audit?
An audit can be a powerful tool, providing the following benefits for your business:
Identify opportunities for improvement and growth
The information an audit provides can be vital in helping make business decisions. The auditor’s recommendations can be used as a key aspect of your board’s quarterly strategic planning. They can cover aspects of improving internal controls to reduce the risk of fraud and errors and may identify opportunities for improvement to help your business operate more efficiently.
An auditor can highlight where there are opportunities to reduce costs or increase profitability. Comprehensive management information and an acute understanding of your business’ key profitability drivers can be used to actively manage and drive improved business performance, as well as being really useful during the sale process.
Increase transparency and credibility
An audit helps to increase transparency, which provides assurance to stakeholders and potential investors that your financial statements are accurate and reliable. Lenders or investors may want your financial statements audited before they will provide funding or invest as they need to be confident your business is financially sound before taking on any risk.
Protect business reputation
Similarly, an audit will help improve your overall risk management and governance policies, which can make your business more resilient to unexpected events and protect its reputation.
A robust approach to corporate governance reduces the perception of risk to a prospective buyer, while simultaneously assuring the buyer that any ‘post-deal’ transition will be as seamless as possible, and an excellent compliance record and attitude to compliance, particularly with regard to HM Revenue & Customs, will always reduce the perceived risk to investors and acquirers.
