How to prepare for your first audit

Whether you’ve hit the threshold for an audit or have chosen to get one done voluntarily, there are a few things to be aware of if you want to prepare for your first audit.

The key is to get things right from the start, and that means good records, minutes and governance.

Get ahead of the curve

A lot of people find their first audit as a shock to the system, but this doesn’t need to be the case, because the triggers for an audit are actually quite predictable.

Either you will cross financial thresholds (more than two of: £10.2 million turnover, £5.1 million gross assets, 50 employees) or a stakeholder in a position of power (such as an important investor) will ask for an audit.

Anticipate when one of these triggers might occur, make it part of your plan and be ready for it. This is simpler if your growth is steady. 

Just know that you are a high-growth company everything happens more quickly, so you need to be on your toes. 

Don’t get caught out by underestimating how far the auditors will look back. Some businesses don’t realise that they will need to go back to the start of the accounting period of the audit date chosen – so a full year earlier. 

Giving consideration well in advance as to how you would like this opening balance sheet to appear in the audit is a useful discipline.

Align your business with an auditor’s mindset

Well before an audit is triggered, review whether your accounting policies are mature enough to stand up to audit. 

Things can get awkward if you have to restate revenue and earnings figures to investors because they were previously not meeting accounting requirements. 

An audit will go beyond the numbers and examine the management decisions that underpin them. Can senior leaders articulate operations, the value the company offers to customers and how these feed into the financial statements? 

Brief key stakeholders and sign-off your numbers

Sure-fire ways to make an audit overrun (on time and budget) are to keep going backwards and forwards on the numbers, or not have relevant people available when the auditors need to speak to them.

To counter this, make sure auditors have access to key staff when required, and that your team is ready to answer the questions they’ll face. 

In advance, gather all the information which will be asked for and get it signed off by the board. Then you’ll know that the figures you are supplying to the auditors are final.

Budget for the cost and time of the audit

Don’t assume that there is a direct correlation between the size of your business and the cost of your audit. It’s the complexity of your business that will determine the time and money required. 

So, when preparing for an audit for the first time, think about: how standardised your key contracts are; whether overseas subsidiaries are in place or if there is a group structure; also whether other auditors need to be involved; and how complicated your activities are. 

These will normally be a better yardstick for predicting the scale of an audit than company size alone.

Get yourself ready

If you want to start getting yourself ready for audit, feel free to get in touch with our experts. 

We can discuss your record-keeping, minutes and governance to make sure they are up to standard, as well as answer any other questions you have.

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