What is an Audit?

What is the importance of audit and why consider an external audit provider?

James Hadfield

James Hadfield – Audit Partner

Many companies within the UK require an audit, but what is an audit and when is it needed?

When does an entity require an audit?

A company is legally required to have an audit if they breach two of the following thresholds:

Turnover greater than £10.2m;
Total assets greater than £5.1m; or
Greater than 50 employees.

Even if a company is below these thresholds it will be required to have an audit if it is part of a group which breaches certain size thresholds. Additionally, sometimes the company’s articles or the shareholders will require an audit. Therefore, even small companies can be required to have an audit.

The objective of an audit

The objective of an audit is to form an independent opinion on the financial statements of the audited entity. The opinion includes whether the financial statements show a true and fair view, and have been properly prepared in accordance with accounting standards.

A misconception is that auditors are required to identify all misstatements. However, they are responsible for identifying material misstatements, not all misstatements.

What does an audit involve?

auditAn audit must be performed by a registered auditor and must comply with certain standards. It involves performing procedures on the numbers disclosed in the financial statements. These procedures are designed to identify material misstatements and regularly involve testing a sample of transactions and balances.

Additionally, the auditor performs a detailed review of the financial statements, including disclosures, to check they comply with accounting standards and company law.

After all the work has been completed the audit opinion is communicated in a standard report which is included in the financial statements of the audited entity. Any weaknesses the auditor has identified in internal controls will also be communicated to management.


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More about Menzies audit and compliance services

As well as meeting your statutory reporting obligations, Menzies’ audit and compliance services are the proactive way to reduce risk and drive forward your business strategy. Our pragmatic, hands-on approach helps you improve your business performance – by challenging assumptions and resolving commercial issues that could be holding your business back.

Our audit and compliance team will help you to:
Add value to your business by using the audit as a basis to identify and resolve commercial issues and to improve your business processes.

– Use the understanding and insight gained from the audit as a basis for helping you develop strategies to drive your business forward.
Reduce risk and improve your organisational performance by challenging existing assumptions and practices.
Secure peace of mind from knowing your statutory obligations are met, accounts are true and potential problems have been identified early on.

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ESSENTIALS

  • “We Menzies over the past year and we continue to be impressed with their knowledge, efficiency and the high calibre of support they provide. The Menzies team look after our year end accounts in a timely and efficient manner, and continue to provide proactive advice in many areas of our business, from keeping track of our product margins and fixed costs to providing us with beneficial forecasting advice. We are also liaising with other teams within Menzies, for example they are assisting us with crowdfunding options and have advised us on building a strong business plan.”

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    Luxury British Brand, A luxury British Brand August 17, 2016

  • “Throughout our many years of working with Menzies, we have always found them to be professional in all aspects of their work. The team currently deal with our UK trading company and the holding companies which includes acting as the group auditors for a large international group. Their historical knowledge of our company and operations is highly important to us especially as we have a fairly complicated group structure. The team are reliable, friendly and organised in their approach.

    We would have no hesitation in recommending Menzies to any other company.”

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    Crabtree & Evelyn, Crabtree & Evelyn August 17, 2016

  • “Menzies LLP have acted as our auditor and advisors for a number of years. The company has a holistic range of services to offer, from the compliance aspects of our business and consultancy services which are undertaken by specialist teams. The firm have recently undertaken a business valuation for a successful acquisition of an overseas subsidiary that our group acquired as it continues to grow and branches out into the overseas markets. We have found Menzies to be reliable, honest advisors and would not hesitate to recommend them.”

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    Contechs Holdings Limited, Contechs Holdings Limited August 17, 2016

  • “We have known Menzies for a very long time. The firm acts as our auditors and advisors for the company and our family’s own personal matters. The team fully understand our affairs and come up with pro-active solutions that are in our best interest and tax efficient for the business and family. We also utilise the services of Menzies Wealth Management so the teams work closely together to ensure our affairs dove tail in their advice. The team are trustworthy and reliable and we would not hesitate to recommend them for your personal or company affairs.”

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    Down Street Electrics Limited, Down Street Electrics Limited August 17, 2016

  • “We have been working with Menzies for a number of years on compliance and advisory matters. The team are approachable and proactive, offering constructive and helpful support, Menzies have over the years during the development of our business consistently met our needs. The team work well to ensure that we achieve our internal deadlines and communicate with us along the way. We would happily recommend Menzies to others.”
    David Moss, Head of Finance – Emmi (UK) Limited

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    Emmi (UK) Limited, Emmi (UK) Limited August 17, 2016