Audits can be a stressful experience, with the ‘A’ word known to send a shiver down the spine of even the most experienced business owner. But, as with most things, preparation is key, so here are our top tips to a smooth and seamless audit.
Check your threshold
It is worth mentioning that not all businesses require an external audit, so check the threshold to see if you’re exempt. In order to qualify for exemption, for accounting periods starting on or after 1st January 2016, your business must meet at least two of the following for two years running:
- The company should have an annual turnover of no more than £10.2m
- The company should have assets worth no more than £5.1m
- The company should have 50 or fewer employees on average
Regardless of size, some companies, such as those which are public or state-owned and those in regulated sectors including banking and insurance, must always be audited.
Remember, even if the above thresholds determine you to be exempt, if your shareholders (who own at least 10% of shares) request an audit, then you must also comply.
Once you have determined that you fall within the audit criteria, it is time to take stock. Although it may seem like an onerous task, it is crucial that you have up to date figures on your stock levels. Also try to complete your stock-take as close to your year-end date as possible.
Make sure your accounting records are organised. Your auditors are likely to need a fair amount of information from you and your team, so the more organised your accounting records are, the easier it will be for you to find what they need.
If you produce your own management accounts, then you should also refer to your latest set of management accounts drafted to the end of the financial year to spot whether you are approaching the threshold of requiring an audit.
Point of contact
It may sound obvious, but your auditors will want to speak to your key staff, so make sure they are available. You may also choose to appoint a lead contact, who the audit team can reach with any initial queries.
Make sure you have a record of your fixed assets, i.e. any equipment or property owned by your business. The auditors will need to see it, plus the details of your depreciation schedule.
To meet regulatory requirements, you will also need to provide copies of all loans and leases, so make sure you have them to hand.
If you have any concerns about your upcoming audit, then simply ask. Your Champion advisor will be more than happy to discuss the audit process with you and confirm what they will need to see.
Many businesses treat audits simply as a compliance exercise, but as a business owner, you may have little time to reflect on the bigger picture. A good audit team will provide valuable insight, spot opportunities and suggest improvements, which is exactly what we deliver at Champion Accountants.