A statutory audit is a legally mandated review of a company’s financial statements by an independent auditor, ensuring they accurately and fairly reflect the company’s financial position.
Beyond compliance, a statutory audit brings significant benefits:
- Enhanced Credibility – Boosting trust with stakeholders, investors, and regulators.
- Improved Internal Controls – Strengthening financial management and operational efficiency.
- Risk Mitigation – Ensuring regulatory compliance and minimising the risk of penalties.
- Fraud Prevention – Identifying weaknesses in financial controls and processes.
According to the Financial Reporting Council (FRC), 80% of businesses that undergo statutory audits report improved financial reporting quality and internal controls.
Who needs a statutory audit?
In the UK, a statutory audit is required if a private limited company meets two of the following three criteria:
- Annual turnover above £10.2 million
- Assets worth more than £5.1 million
- More than 50 employees on average
With that said, some thresholds will increase from 6th April 2025 to the following:
- Annual turnover worth more than £15 million
- Assets worth more than £7.5 million
- More than 50 employees on average (same as current)
Certain businesses, such as public companies and larger private entities, must undergo audits regardless of these thresholds.
However, many businesses voluntarily undertake statutory audits, viewing them as a valuable tool for securing investment, winning contracts, and demonstrating a commitment to transparency and rigorous financial management.
Preparing for a smooth statutory audit
To make the process as seamless as possible:
- Organise Financial Records – Ensure all key documents (balance sheets, income statements, and cash flow reports) are accurate and up to date.
- Review Internal Controls – Identify and address any weaknesses in financial procedures.
- Communicate with Your Auditor – Establish clear expectations on the audit scope, timeline, and key areas of focus.
- Prepare Your Team – Ensure your finance team is equipped to provide the necessary documentation and support.
What to expect during the audit process
A typical statutory audit follows these steps:
- Planning & Risk Assessment – The auditor assesses financial statement risks and gains an understanding of your business and internal controls.
- Testing of Controls – Auditors review processes, inspect documents, and interview staff to verify compliance and efficiency.
- Substantive Procedures – A deeper dive into financial transactions using sampling, analytical procedures, and third-party confirmations.
- Evaluation & Reporting – Findings are analysed, and a final audit report is issued, highlighting key recommendations.
The FRC reports that a statutory audit for a medium-sized company typically takes three to six months from planning to completion.
The key to audit success: proactive preparation
Delays often arise due to incomplete records, poor communication, or weak internal controls. Preparing early and proactively addressing potential issues ensures a smooth and efficient audit process.
Rather than viewing an audit as a one-off requirement, businesses that take a continuous improvement approach to financial management will reap the most benefits. Regularly reviewing internal controls and financial reporting processes keeps your business audit-ready year-round.
A smarter approach to statutory audits
A statutory audit isn’t just about compliance – it’s an investment in your business’s integrity and future growth. It reassures stakeholders, enhances decision-making, and ensures your company is well-positioned for long-term success.
If you’re preparing for a statutory audit, Champion’s expert audit team is here to guide you through the process. Contact Gary Woodall on 0161 703 2500 to learn more.
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