What’s a financial audit?

Pre-pandemic, you probably heard the phrase ‘the auditors are in’ banded around offices for years. As suited and booted individuals take up a meeting room in your once carefree office, poring over stacks of paperwork, looking for discrepancies and trying to catch you out. 

For the uninitiated, the mere sight of the word “financial audit” on the calendar would be enough to raise anxiety levels throughout the business. However, we at Ascendis Audit Limited are going to show you that there is power in knowledge, so sit back and let us guide you through the world of audits.

What is an audit? 

We’re an accountancy practice, so let’s concentrate on a financial audit. 

It’s a type of review in which an auditor examines the accuracy of the client’s records and describes any discrepancies or areas of improvement in them. The accounts should show a “true and fair view” of the result for the year and of the net assets at the year end. Audits are performed when one is required by regulations, or when there is a specific reason that the company decides to have an audit performed. These are usually voluntary audits that are done when a company is trying to show that they are in compliance with regulations, want suggestions for improvements within their company, or want valuable information about internal controls to help prevent fraud, theft or error.

Who usually performs them? 

For the layperson, who thinks it’s a standard accountant… you’re wrong. Kind of. They are actually conducted by independent specialist auditors who adhere to strict standards.

Financial audits are performed by these auditors to verify the accuracy of financial statements and that they show a true and fair view. This is done to determine if the transactions in an entity’s books match what was actually invoiced, recorded, and deposited. The auditors will also examine internal controls at the company, which are guidelines about how income and costs should be tracked and reported. It is the auditor’s job to report fraud and fraud risks.

Are audits only performed on trading companies?

No. they are also performed for not-for-profit entities to verify that they are being run properly. This type of audit is done to ensure that they have properly accounted for all of their revenue, expenses, assets, and liabilities, and spent any grant income on what it was earmarked for. This type of audit is more common in charities, government agencies, hospitals, educational institutions, or healthcare organisations.

If no problems are found during the audit process the audit report will be described as having a “clean opinion”. This is preferable to a “qualified opinion”, where the auditor does not believe your accounts are correct, which can lead to issues with suppliers and customers, as well as a downward impact on credit scores.

There are four major phases of an audit. 

  • ● Planning  
  • ● Fieldwork
  • ● Completion
  • ● Audit Report 

What happens after the audit is complete? 

Once it’s completed, the auditor will provide the client with their findings. Ascendis Audit Limited does this using an Audit Findings Report.

Sometimes, clients will need to make changes to certain parts of their company after the follow-up review. A client may ask for changes to be made if they wish to make material changes in how they use money or if there are management concerns. They may also request more details about any findings that were previously uncovered during the audit process.

When are audits performed?

They are normally performed by auditors on an annual basis, but they can also be requested for one-off purposes. As private limited company accounts have to be filed with nine months of year end, audits are typically done within two to six months of the year end. If an auditor finds anything suspicious about the company’s financial records either during or after the audit process, it is required that the auditor report the findings to the management of that business.

How do I begin the process? 

Contact us. Don’t stress about the small stuff or try and wade through it yourself. Contact us and one of our team will discuss your situation and give you the best advice going forward. We offer both in house and remote options, so you’ll be guaranteed a solution that works for you and your business.