A Closer Look at Auditing: What You Need to Know
When delving into the world of finance and business, you’ll come across the term ‘audit’ quite often. To a beginner, this may seem like a daunting term, shrouded in layers of complexity. However, in essence, an audit is a meticulous examination of a company’s financial statements and operations. Let’s take a closer look at what auditing involves, who needs it, the key qualities of an excellent auditor, and some recent changes in auditing regulations.
The Role of a Good Auditing Firm
A good auditing firm is more than just a number-crunching entity. It offers a diverse range of services across different areas, all while harnessing the expertise and passion of its team members to achieve the best possible results for clients. These firms also provide audit services in conjunction with other services like preparing statutory accounts and drafting corporation tax computations.
Moreover, they perceive an audit as an opportunity to scrutinise a business in-depth, to identify areas of risk, suggest improvements to systems, and add value. The best firms foster relationships with other accountancy firms for concurrent work, combining their resources and expertise to deliver optimal results.
Who Needs an Audit?
A business requires an audit if it has a turnover of more than £10.2 million, an average of more than 50 employees, or gross assets (fixed assets combined with current assets) of more than £5.1 million. If a business ticks two of the above three boxes, two years running, it is obliged to have its accounts audited.
However, auditing isn’t exclusively for businesses that meet these criteria. Some businesses voluntarily choose to have their accounts audited even if they do not meet the criteria, recognising the value in the rigorous review and the insights it can provide.
What Makes a Good Auditor?
A good auditor is not just technically proficient but also curious and diligent. Their role extends beyond preparing accounts. They check for fraudulent activity and offer an outsider’s rigorous review, providing clients with reassurance and highlighting areas that need strengthening.
Changes and Regulations in the Auditing Profession
Auditing has evolved into a more intricate and highly regulated process. Audit files and partners are regulated by bodies such as the Institute of Chartered Accountants of England and Wales (ICAEW). The profession carries a significant reputational weight, providing the outside world with assurance about the standard of the accounts.
Recent changes like the introduction of ISQM 1 and ISA 315 have impacted the auditing process. Future alterations to Accounting Standards, such as the proposed FRED 82, will affect how numbers are recorded in accounts, particularly concerning leased assets.
Choosing the Right Auditing Firm
Choosing a good auditing firm for audit services is crucial. Top firms pride themselves on cultivating close relationships with clients, often spanning many years. Their focus is not on processing many clients but on understanding each individual business and delivering a high-quality personal service. These firms take the auditing process seriously, investing significant time, resources, and care to offer the best quality of service for their clients. They view audits as opportunities to enhance clients’ systems and assist with their tax liabilities.
One example of a company with this approach is Monahans. Martin Longmore, Partner, said “We pride ourselves on holding close working relationships with all of our clients – they’re not just numbers to us, many we have known and worked with for many years. From client feedback that is what seems to set us apart – our aim isn’t to churn through as many clients as possible, instead we focus on understanding each individual business and delivering a high-quality personal service.”
Auditing is a complex, regulated but indispensable process in the business world. A good auditing firm goes beyond the traditional services, providing valuable insights and solutions to improve the businesses they work with. Whether your business meets the auditing criteria or not, having your accounts audited can offer numerous benefits, including an in-depth review of your operations, detection of any fraudulent activities, and potential improvements to your systems. So, choose an auditing firm that understands your unique needs and can help steer your business towards a successful future.