What Are the Benefits of a Financial Audit?
For businesses of all sizes, financial transparency is essential for building trust with stakeholders, attracting investment, and ensuring long-term stability.
In this blog, our audit and accountancy experts will explore the key benefits of financial audits and their crucial role in the success of any business.
What is a financial audit?
A financial audit is an independent and thorough review of a company’s financial statements, carried out by an external and independent auditor.
Its main objective is to verify that the financial statements are accurate, compliant with relevant accounting standards and regulatory requirements, and provide a “true and fair” view of the business’s financial health.
Are financial audits a requirement?
Some businesses are required to conduct a financial audit, but this depends on the size and structure of your business. In the UK, companies that meet two or more of the following criteria are legally required to undergo an annual third-party audit:
- Turnover exceeding £10.2 million
- Assets worth more than £5.1 million
- 50 or more employees
Additionally subsidiaries of International groups must have an audit regardless of their size, as do certain financial services and charities. This Is often overlooked by accountants who merely consider the traditional 3 step criteria.
Alternatively, stakeholders, such as investors, lenders, or potential buyers, can request an audit to ensure financial accuracy and accountability.
Even if your business isn’t legally required to have an audit, voluntary audits can provide valuable insights, improve financial controls, and enhance credibility with stakeholders, particularly banks and prospective customers.
What are the benefits of a financial audit?
Audits are important because they provide three key benefits for businesses – creditability, confidence, and control.
Audits enhance your credibility and increases business value
By engaging with an external statutory audit firm, a company’s financial statements are given greater credibility, which can be particularly valuable if a business is looking to raise funds for growth, work with more sophisticated customers or preparing for a business exit.
Many factors contribute to the overall value of a business, but an audit will enable you to minimise risk, identify and rectify system & control weaknesses and add value in the long-term.
Audited accounts provide comfort that a company’s financial reports are free from material misstatement, whether caused by fraud or error, giving stakeholders greater confidence in the organisation’s financial integrity.
Audits provide confidence for stakeholders
Whilst smaller businesses are often owner-managed, there is a significant number where multiple directors run the company on a day-to-day basis. Some companies are also managed on behalf of shareholders who have minimal operational involvement such as the international subsidiary companies.
By providing an impartial assessment of a company’s financial statements, an audit can give confidence and clarity to directors and shareholders that the operations of the company are being run correctly, effectively and in their best interests.
Audits give you greater financial control
Alongside the verification performed on a company’s financial data, an auditor will also obtain an understanding and test the operation of a company’s core financial systems, which underpin the figures presented in the financial statements.
In doing so, an auditor will assess the effectiveness of the controls operating within each system and make recommendations to correct weaknesses to minimise the risk of fraud or error and generally improve the financial functions performance.
How Edwards Chartered Accountants Support with Financial Audits?
At Edwards Chartered Accountants, we offer professional and insightful audit services tailored to your business needs. Our audit and accounts teams are committed to meeting deadlines, maintaining clear communication, and delivering a high standard of service.
By working closely with you, we ensure that the same team handles your audit each year, giving you peace of mind that your financial health is in expert hands.
If you’d like to discuss your audit requirements, contact us today.
