Statutory Audit – It Doesn’t Have To Be Onerous

A statutory audit is one of the most common legal requirements faced by existing businesses. If a company meets specific criteria, such as reaching a certain size or being regulated by the FSA, then they are required by law to submit to an audit. Although this requirement can be seen as a burden or an unnecessary use of company resources, there are advantages of submitting to a statutory audit that go far beyond merely satisfying your legal obligations.

The results of a statutory audit are generally intended to show that the company is providing a fair and accurate representation of its financial position. It’s easy to see, therefore, why many stakeholder agreements require regular audits even when they aren’t a statutory requirement. The security and reassurance offered by an audit (either statutory or voluntary) can be attractive to potential stakeholders and investors and thus prove to be extremely beneficial to the business.

However, the consequences and results of a statutory audit are far-reaching and generally provide numerous benefits to the company. For example, the audit will identify potential weaknesses in the company’s current processes or working methods and highlight why they may post a risk to the business. This enables the management team to consider possible changes to the business before any problems or issues have occurred. If required, an audit team can go as far as providing potential solutions and conducting in-depth risk analysis allows the company management to make their decision based upon up-to-date research and information. Whilst this is beneficial in the day to day running of the business, it’s also extremely advantageous for the company as they can reduce unnecessary risk rather than reacting to problems caused by risk that could have been avoided.

Many audit teams are comprised of experts and specialists in their chosen field which allows businesses to engage a team of professionals who have experience within in their industry or sector. Due to the differing regulations and working methodologies of businesses, industries and charities, there isn’t a ‘one size fits all’ approach when it comes to effective auditing. The knowledge required to conduct a comprehensive statutory audit is extensive and is often sector specific. For example, the legal regulation governing an investment company differs considerably from a product distribution company. If you’re running an SME you may not need an auditor experienced in auditing multinational conglomerates but may benefit from an auditor experienced in working with small and midsize companies who is familiar with the issues faced by such businesses, as well as the growth potentials.

When commissioning an auditor or team of auditors to carry out a statutory audit, you are doing more than simply instructing them to analyse the business to ensure certain criteria are satisfied. While this is undoubtedly a part of the auditing process, a statutory audit achieves far more. By choosing the correct team to conduct the audit, you are gaining access to a team of professionals with varied and diverse experience within your industry. They can not only advise you on current issues your business is facing but provide information and advice about future changes to legislation and regulation, upcoming industry changes and the impact this may have on the company. Rather than being reactionary and waiting for these changes to occur you have the opportunity to be at the forefront and become a market leader as a result of the information and advice obtain via a statutory audit.

Although often overlooked, the benefits of a statutory audit can have a profoundly positive effect on a business. Providing the management look beyond the statutory requirement and put the data obtained from the audit to good and effective use, a statutory audit can be an unequivocal benefit to the business, its investors and stakeholders as well as its customers and clients. Although many businesses are obligated by law to ensure a statutory audit is carried out, the information obtained from the audit is often so valuable to businesses that they carry out voluntary audits to maximise businesses revenue and growth regardless of statutory obligation. Whilst a statutory audit does ensure a company’s legal obligations are fulfilled and that their financial management is accurate and transparent, it also enables the company to reduce costs, increase profit and optimise business performance.

Baker Tilly is an independent firm of chartered accountants and business advisers, positioned as one of the leading mid-tier accountancy firms. Baker Tilly specialises in Statutory Audit  services to corporate organisations.