Audit services

Audits – Everything you need to know

 

What is a Financial Audit?

 

A financial audit looks at an organisation’s financial reports. It checks for accuracy, reliability and compliance with accounting standards. This includes:

Financial Reports: Documents that show a company’s performance, balance sheets, income statements and cash flow statements. Accurate financial reports build trust and transparency.

Audit Process: The steps auditors go through to review financial data. This includes planning, testing controls, substantive testing and reporting. Each step checks different parts of financial integrity.

Compliance: Meeting legal and regulatory requirements. Compliance reduces risk of legal penalties and builds organisational reputation.

Material Misstatement: Errors or omissions in financial reports. Finding material misstatement ensures financial reports are accurate and reliable.

Auditor: An independent person who does the audit. Auditors review financial records, find mistakes and give an unbiased opinion on financial reports. Professional scepticism is key to accuracy and transparency in reporting.

 

Why carry out Financial Audits?

 

Financial audits verify the accuracy of your financial reports and ensure compliance with accounting standards. By prioritising stakeholder interests and regulatory compliance, we integrate skilled professionals and advanced technology to deliver high-quality audits.

For Businesses

Financial audits give businesses and organisations:

• Credibility: Stakeholders, including investors, banks and suppliers, see audited financial reports as more trustworthy.
• Better Internal Controls: Auditors find weaknesses in your internal controls so we can fix them.
• Fraud Prevention: Regular audits help detect and prevent fraudulent activities, ensuring a culture of integrity.

These benefits apply to your financial health and operational security.

 

When do you need a statutory audit for financial reporting?

 

Companies that meet certain criteria must have a statutory audit. The criteria is determined by financial size and structure.

1. Annual Turnover: Companies with an annual turnover over £10.2 million need a statutory audit.
2. Balance Sheet Total: Companies with a balance sheet total over £5.1 million are required to have a statutory audit.
3. Employee Count: Entities with more than 50 employees are subject to these audits.

Other entities requiring statutory audits include public companies, financial services firms, and charities. Public companies are always subject to statutory audits. Financial services firms, such as banks and insurance companies, also require audits due to stringent industry regulations. Charities must undergo an audit if their annual income exceeds £1 million, or if they have gross assets over £3.26 million with an annual income above £250,000.

Additionally, companies engaged in regulated activities, including those in the energy supply, telecommunications services, or gambling sectors, need to conduct audits to adhere to specific regulatory requirements.

 

Types of Financial Audits

 

Financial audits can be categorised into different types, each for a purpose. Understanding these types helps businesses choose the right type of audit for themselves.

Internal Audits

Internal audits are done by an organisation’s own audit team. These audits find operational inefficiencies and assess risk management and compliance with internal policies. For example, a manufacturing company may do internal audits to verify compliance with its safety protocols.

External Audits

External audits are conducted by independent auditors who are not affiliated with the organization. These audits ensure the accuracy and fairness of financial reports. External auditors provide an impartial opinion, enhancing the credibility of the organization’s financial statements. Public companies frequently undertake external audits to satisfy both regulatory requirements and stakeholder expectations. Conducting a thorough and effective audit is crucial for building societal trust and maintaining precise financial reporting.

Government and Regulatory Audits

Government and regulatory audits are required by government bodies or regulatory authorities. These audits ensure compliance with laws, regulations and industry standards. For example, the Financial Conduct Authority (FCA) can audit financial services firms to ensure they comply with sector-specific rules.

 

The Audit Process

 

The audit process entails a series of meticulously planned steps designed to ensure accuracy and compliance. This includes detailed planning, careful execution, and thorough follow-up to guarantee that all financial practices meet the required standards.

Planning and Preparation

Planning and preparation is the foundation of the audit. Auditors develop an audit plan based on an initial risk assessment. High-risk areas get more attention. Auditors collect relevant financial documents such as ledgers, bank statements and compliance records. Understanding the client’s business is key. Auditors set clear objectives, timelines and team responsibilities during this phase.

The Audit

The audit involves executing the plan. Auditors do substantive tests and procedural checks. Substantive tests verify financial statement line items with transactions, balances and disclosures. Procedural checks assess internal controls. Auditors collect audit evidence and compare it against established benchmarks. They often use sampling to test large volumes of transactions. Analytical procedures to identify unusual trends or discrepancies.

Reporting and Follow-Up

Reporting and follow-up are crucial to address findings from the audit. Auditors produce a comprehensive report detailing any issues identified, weaknesses in controls, and instances of non-compliance. They also offer recommendations for resolving these issues. The management’s response is vital as it outlines the actions that will be taken. Follow-up procedures are then implemented to ensure that management has rectified the issues within the specified timeframe. The final audit report plays a key role in enhancing both financial integrity and operational efficiency.

 

How to Prepare for an Audit

 

Preparation is key to a smooth and accurate review process.

Organisational Tips

Organisation is the key to a successful audit. Set a clear timeline well in advance and break it down into specific deadlines for each phase of the audit. Assign team members to handle different parts of the audit and define clear roles and responsibilities. Have a pre-audit meeting to align all relevant personnel with audit objectives and processes.

1. Timeline: Set milestones for each stage of the audit.
2. Team Roles: Assign audit tasks to team members.
3. Pre-Audit Meetings: Have a meeting to discuss audit objectives and procedures.

Documentation and Record Keeping

Documentation and record keeping are crucial to a smooth audit. Keep records up to date, including financial statements, bank statements, invoices, and receipts. Use a centralised digital system to store and manage documents and make them easy to retrieve. Cross-reference documents to validate accuracy and completeness.

1. Up-to-date Records: Current financial documents to avoid mistakes.
2. Centralised System: Store documents digitally.
3. Cross-Referencing: Verify against each other.

 

Technology in Financial Audits

 

Technology is transforming financial audits, making them more efficient and accurate. The use of the latest tools and methodologies has a big impact on the auditing process.

 

Audit Software

 

Modern audit software automates routine tasks to reduce human error and improve audit quality for various business models. These tools increase productivity by simplifying data collection, analysis and reporting. For example, software like ACL and IDEA gives auditors powerful data analysis capabilities to quickly spot patterns and anomalies. Cloud-based platforms also allow real-time collaboration among audit teams. By using these technologies auditors can focus on the strategic part of the audit and assurance.

Big Data and Analytics

 

Big data and advanced analytics is crucial to financial audits. Data analytics allows auditors to process huge financial data and extract valuable insights. Auditors can now process huge financial data and extract valuable insights. Analytics tools like Tableau and Power BI helps in visualising complex data sets and spot anomalies and risks. Predictive analytics enables auditors to forecast trends and potential issues and be ahead of the audit. By using big data we can go deeper and more accurate on our financial assessment.

In summary, technology enhances the audit process, making it quicker, more effective, and allowing for more thorough and meaningful financial audits, which leads to better decision making.

 

Which Industries Do We Audit?

 

Our audit practice serves a wide range of industries, enabling us to provide comprehensive audits.

Here is a list of industries we service. Don’t see your industry listed? No problem—just get in touch, and our team of audit experts will be ready to assist you.

Public Sector

By auditing government bodies and public institutions we promote transparency and accountability. Our audits ensure public funds are used properly and deliver insights that improve governance. As these audits often include performance reviews they help to improve operational efficiency in public sector entities.

Financial Services

Our audits for banks, credit unions, and insurance companies focus on regulatory compliance and financial accuracy. We utilise a combination of technology and human expertise to deliver high-quality audits that build confidence in financial reporting. Our services in this industry are robust and designed to meet stringent regulatory requirements.

Creative, Media, Technology and Telecoms

This fast-moving industry, driven by continuous technology changes, requires an audit approach that can adapt to the changes. Auditing in this industry involves reviewing rapidly growing and changing financial records. Our audits in this industry help businesses to manage the risks associated with technology changes.

Hospitality

In the hospitality industry, effective financial reporting and internal controls are crucial. Our audits help businesses in this sector enhance financial management and compliance, enabling them to grow and operate efficiently. The hospitality industry faces unique challenges and demands an audit process that is as dynamic and adaptable as the industry itself.

Professional Services

Law firms, consultancy and other professional services firms use our audit services to maintain compliance and financial accuracy. We help these organisations to improve operational efficiency and financial performance and provide clear and accurate information to stakeholders.

Real Estate and Construction

Audits in the real estate and construction industry involve detailed financial reviews to ensure compliance with legal and industry requirements. We help clients to navigate complex transactions, improve financial reporting and increase investor confidence.

Health and Social Care

Our audits benefit healthcare providers and social care organisations through compliance, operational efficiency, and financial transparency. Our expertise ensures these critical services are held to the highest standards of accountability and performance.

We also audit other industries, adapting our approach to suit the specific needs and regulatory requirements of each industry. By working with us, businesses across many industries can expect a reliable audit that improves their financial position and operational efficiency.