Preparing for a Statutory Audit

Statutory audits can provide;

  • Feedback on internal controls and processes effectiveness within the company
  • Outside perspectives and thoughts about the company.

Confidence in the business can be enhanced with audited financial statements. It helps when looking for future finance or investors.

There are a number of steps that a company should take if appointing an auditor for the first time;

  • Define needs
  • Market research
  • Auditor appointment
  • Preparation for audit
  • Final report

Define Needs

Consider why the company is appointing an auditor. Is there a legal requirement to have an audit (many companies are audit-exempt, so do not legally require an audit) or have the shareholders requested an audit?

Market Research

Many large companies will put their audit out to tender. Such a formal process may not suit smaller firms, so it may be more appropriate to meet a number of prospective auditors to discuss your company’s requirements. Meeting with prospective auditors is a useful way to gauge their working and communication style.

Auditor Appointment

The directors usually appoint the first auditor; they are then appointed or reappointed at each AGM. The Companies Registration Office maintains a register of all those individuals and firms that are appropriately qualified to provide statutory audit services.

Audit Preparation

To ensure that the audit process is as efficient and effective as possible, you should engage as early as possible with the auditor to agree a timeline and prepare the relevant records. The auditor may be able to assist you with these final preparations, although there are limits, due to independence rules, as to what the auditor can do.

The auditor will generally arrange a planning meeting. An engagement letter will issue, which sets out the respective responsibilities of the auditor and the director. This should be reviewed carefully. Ask the auditor to explain any terminology that you are not familiar with.

Final report

A final statutory audit report setting out the auditor’s opinion will issue to the members of the company. The key findings and shortcomings noted in the company’s internal controls and processes will be outlined, providing you with insight into the business and a deeper understanding of the potential risks you may be exposed to.

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