Can you honestly say that you know what an audit is? This is a word that can create a lot of dread when it is mentioned to a manager or director. But, an audit is something that you have to be aware of if you want a company to be successful. Let’s take a closer look at what an audit is, what type of business will have one and what the potential benefits are of an audit.
What is an Audit?
First of all, let’s make sure that you understand exactly what an audit is. Indeed, there are often negative connotations associated with the word ‘audit’. But, it does not always have to be this way.
An audit is a process that involves making an independent opinion on the financial state of a company. An auditor is going to follow specific procedures in order to find out whether financial states are accurate and to identify if a business is a going concern. An auditor is allowed to access a lot of information during their investigations. This includes being able to access accounts, vouchers and company books. In addition, if there is an employee in charge of relevant information, they can be asked questions for the purpose of the audit.
There is no doubt that audits can make you stressed and worried. After all, you want to ensure everything goes right for your business. But, it is important to know that there are things you can do to make sure that the audit is as successful as possible. For example, you can use professional accounting services in Northwood. This can mean that an expert takes on some of the responsibilities on your behalf during an audit. For example, they can submit financial statements, find ways to lower tax liabilities and suggest improvements you can make.
What Company Will Need an Audit?
First of all, is important to understand that not every company will be obligated to complete an audit for a financial year. There are certain rules regarding what companies must carry out this process. Namely, you will not be required to complete an audit if you are found to be a small company.
In order for your company to be classed as a small organisation, you must have a turnover of less than £10.2 million. In addition, the gross assets should be less than £5.1 million. When it comes to the number of employees, this is going to be important too. Typically, a small business will have less than 50 employees. If your company is known to be part of a group of companies, then you have to take into account the characteristics of all these companies when you are considering the audit rules.
The Benefits of an Audit
Some companies still choose to go ahead with an audit even if they can apply an exemption to your situation. There are a number of reasons why a company might consider doing this since it can offer advantages.
For example, nobody wants there to be errors and mistakes in financial statements. Conducting an audit can assure shareholders and directors that there are no errors. They can enjoy peace of mind and know that administration is correct. In particular, if there have been complicated transactions, an audit is going to ensure that everything is the way it should be and it is recorded correctly.
Conducting an audit is a good way for a number of players to see how a business is performing financially. For example, potential investors will benefit from an audit, as well as banks, suppliers and customers. It will mean that companies are more likely to be approved for a loan or to secure a large deal with a supplier. It can improve trust between parties and allow reassurance.
What’s more, no business wants to have a HMRC inspection. When you conduct an audit, this is going to reduce the chance of this happening. Your tax returns should be more reliable and you will not have to worry about finances and all the numbers.
There are accounting services you can use to carry out an audit at your company if you want to. They are going to review the accounting systems you are using and look at financial information. An expert will provide you with an audit report, which is going to provide you with a lot of useful details. In particular, you will be able to see your company through the eyes of different players. This includes the taxman and banks.