The Government earlier this year announced its intention to increase the company reporting thresholds, lifting thousands of businesses out of the audit thresholds. But just because a business may not need an audit that does not mean it shouldn’t. A voluntary audit can help a business strengthen its financial management and build trust.
Company audits are often seen as a compliance activity that must be endured every year, and many business owners will have welcomed the Government’s proposals to change reporting thresholds, lifting many businesses outside of the audit threshold.
An annual audit is, however, much more than a compliance obligation. It is an opportunity for a business owner and its directors to take a step back from the day-to-day running of their business and look at the bigger picture, the direction of the business and the challenges and opportunities it faces. It is an opportunity for directors or business owners to be on ‘top of the business’ rather than ‘in the business’. That is why so many businesses are opting for a voluntary audit.
Here are just a few of the benefits a voluntary audit can bring.
Credibility. A voluntary audit provides a strong demonstration of transparency and a commitment to financial integrity, building and maintaining trust with various stakeholders. It creates the good habits a business on a growth trajectory will need.
Stakeholder confidence. Audited financial statements can provide the confidence that a company’s various stakeholders – its suppliers, customers and key employees – might want or need. This can, in turn, strengthen the relationships with these parties.
Access to capital. Lenders and funders will often require a business to be audited whether it is legally required to or not. Businesses looking for external funding – whether from a bank, angel or private equity funders – can take the proactive step of a voluntary audit to meet those demands before that funding is needed.
Internal controls. Audits include a thorough review of the internal processes and controls in a business. This can help identify any weaknesses and inefficiencies and the steps that can be taken to strengthen them. In return, this can help reduce the risk of errors and mistakes and the risk of fraud.
Strategic planning. Annual audits create good corporate habits, providing business owners and directors with the opportunity to sit down with their advisers to discuss performance trends and areas for improvement that will shape strategic planning and decision-making.
Regulatory compliance. Finally, some businesses despite falling outside of the reporting thresholds are required in law to have an annual audit. These include not-for-profits, limited liability partnerships, financial services companies, subsidiaries of larger companies, businesses listed on public markets and businesses that look after a collective pool of investor assets.
Future exit. If an exit is planned via a sale a voluntary audit will enhance the credibility of the business and its financials to potential acquisition targets. It will help a business understand its journey towards that exit.
To understand how a voluntary audit might help your business, contact the experts below.
