Crossing the audit threshold is an enormous step for businesses. Once your company meets a set of criteria, a statutory financial audit will be required (with a couple of exceptions).

What is an audit?

• An audit is an independent review of a company’s financial statements that results in an opinion on whether the statements reflect a “true and fair” view of its financial position.
• It helps to verify that financial statements comply with relevant laws and accounting standards.
• It can also be a useful way to provide assurance to stakeholders (such as investors, customers and creditors).

Gravitate Accounting is not an auditor. However, we have helped lots of clients futureproof their finance functions through automation and accurate record keeping.

The audit threshold

Limited companies must seek an annual financial audit if it meets at least two of the following criteria:

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The above is a general guideline, and there are additional details to consider. Some company types (such as public or financial services companies) must be audited regardless of their size. Shareholders with a sufficient stake in the company may also demand an audit.  

There are a series of additional rules and exemptions that apply, which can be found on the Gov.uk website.

SMEs should prepare for their future audit obligations

The turnover and asset thresholds mentioned above might seem a long way away for a lot of businesses, particularly start-ups and smaller SMEs. That said, ambitious businesses on a strong growth trajectory should be aware of their potential audit obligations.  

It’s always better to be prepared, and audit readiness can really boost your business efficiency, operations and finances in the meantime.  

How you can prepare your business of an audit

Being audit ready involves well-organised, accurate, and accessible financial records and processes that comply with UK regulations and accounting standards.

In other words – it means getting your business finances and operations in ship shape.

Make sure you’re following the UK’s regulations

There are a ton of rules governing how businesses in the UK must operate, and lots of these will not be irrelevant to you. However, it’s wise to familiarise yourself with which of these do apply to you, including:

• The Companies Act 2006 requirements for company accounts and audit
• Complying with UK GAAP or other accounting standards when submitting your tax returns and annual statements.
• Getting your taxes right

Below are some of our top tips to prepare your business for future audit requirements.

Automate your bookkeeping and finances!

You should be maintaining meticulous records of ALL your financial transactions, regardless of your business size. This doesn’t just help with an audit; it is a great way to improve efficiency, cut waste and ultimately make more profit.

When the auditor comes knocking, they will need to be able to trace transactions all the way from start to finish.

This might sound like a lot of work. The good news is you can automate almost all of this using the right combination of accounting software. Speak to us if you’d like to know more about this.

Make sure your internal controls work properly

Human error and fraud can be catastrophic for businesses long before they show up in an audit. It’s essential that growing businesses implement effective internal controls to minimise this.

This means things like segregating duties, having strict authorisation procedures and regular reconciliations.

Consider a voluntary audit

You might not need an audit for a while, perhaps years depending on your rate of growth. But you can actually opt for a voluntary audit before then. This can be a really useful way to familiarise yourself with the process, and can boost the credibility of both your company and yourself as a business owner/director.

Build a culture of compliance

Being audit ready isn’t just the job of the directors or finance team; it’s everyone’s responsibility. All staff members should be encouraged to build their awareness and commitment to compliance, security, efficiency and financial integrity.

How Gravitate can future proof your company for Audit readiness

Using our broad expertise with innovative apps and automation systems, our team can help boost your audit readiness long before it is a legal requirement. This means…

• Enabling real-time access to high quality financial data
• Automating your systems for greater accuracy
• Helping you identify and prevent fraud
• Creating clear audit trails
• Ensuring compliance with the latest regulations
• Setting you up with organised and accessible records

If your long-term growth plans may eventually push you over the audit threshold, don’t delay. Getting the fundamentals right now can set you up for success later, and greater efficiency in the meantime! Send us a message if you’d like to discuss this further.