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, good communications 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.
You may cross financial thresholds (two or more of: £10.2 million turnover, £5.1 million gross assets, 50 employees) or be required to have an audit by a regulator, your bank or an entity which has provided a grant to you.
If you anticipate when these trigger points might occur, then make it part of your planning and be ready for it.
Just know that if your company is undergoing high-growth 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.
Align your business with an auditor’s mindset
Well before an audit is triggered, review whether your accounting policies are clear and well documented.
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, not having documents or evidence to support the accounting records or not having the right 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 information you are supplying to the auditors is accurate.
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 cost and time required.
So, when preparing for an audit for the first time, think about: how standardised your key contracts are; whether there is a group structure; 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, and documentation to make sure they are up to standard, as well as answer any other questions you have.