Audit thresholds are altering in 2026.
Sensible motion equivalent to getting your paperwork prepared and reconciling your accounts is crucial.
An excellent auditor will spend time with you to get to know your online business.
The auditor will show you how to establish the weak spots in your online business, however get in contact with them when you have any main modifications developing, e.g. an enlargement.
Quick-growing companies could discover themselves throughout the audit cycle ahead of anticipated. Relatively than viewing audit as a burden, they need to see the alternatives it has to assist them obtain development plans and past.
For monetary years commencing on or after 6 April 2025, the edge for requiring an audit is assembly two of the three standards for 2 consecutive years:
An annual turnover higher than £15 million
Complete Property higher than £7.5 million
50 or extra staff on common
It’s essential to notice some varieties of enterprise require an audit no matter these qualifiers and a enterprise will need to have an audit if shareholders who personal not less than 10 per cent of shares ask for one.
From 1 January 2026, nearly all industrial leases will have to be capitalised and recognised on the stability sheet which can end in a rise in gross property, tipping some companies over the edge ahead of anticipated.
Get probably the most out of your first audit
Begin early because it’s essential to search out the proper auditor for you – they’re a useful resource to assist your online business develop.
Discover an auditor with sturdy technical experience and expertise, but in addition the proper private traits to facilitate top quality conversations with you as a way to be assured they perceive your online business and future plans. This isn’t solely basic for a high-quality audit, but in addition in supporting you to plan forward and entry recommendation on the proper time.
Sensible audit preparation
Organise monetary information. Make certain all monetary information together with revenue, bills, property and liabilities are updated. An in depth common ledger needs to be obtainable exhibiting all transactions.
Get supporting paperwork prepared – financial institution statements, invoices, receipts and contracts. Be ready to entry older information.
Reconcile accounts. Carry out month-to-month reconciliations for all stability sheet accounts, e.g. financial institution, debtors, collectors, fastened property, inventory and perceive what any reconciling objects are and be capable of assist them with underlying documentation.
Inventory depend at 12 months finish. Plan operationally as you must depend and auditors have to attend and do a pattern depend.
Auditor ought to situation you with a ready by shopper checklist. Higher to ask than guess what they need so you have got time to reply. Collaboration is essential.
Logistics
Appoint an individual accountable internally as key contact together with your auditors to drive the audit prep and timetable.
Let inside stakeholders know what the audit is and what is perhaps required of them.
Assist your crew – it needs to be a collaborative course of internally too.
An excellent auditor will plan the audit properly and spend time with you to know the enterprise, your processes and controls to have the ability to appropriately decide the important thing dangers within the enterprise. Audit work is focussed on the important thing dangers. That is designed to make the audit sturdy, environment friendly and top quality, serving to you get most worth to your cash.
Sensible issues like a web site tour are useful. Additionally put together by being clear on what your processes are, who does what, what your controls are (for instance authorisations on funds, invoices and key transactions, passwords and entry to banking and IT methods and any inside critiques of the numbers and reconciliations).
Talk about any key judgements and estimates early earlier than the audit and have upfront conversations about accounting insurance policies for crucial areas like income recognition. This helps forestall surprises later as soon as your numbers are finalised and being audited. Be clear in your estimates for inventory provision, dangerous debt provision, and so forth., and why you’ve come to quantity.
On the early planning assembly, the auditor will clarify the place they see the dangers, work to be carried out and the timeline. That is the place it’s actually essential you agree expectations. I’d advise you agree key milestones of not simply when the auditors will carry out the work however to your personal planning, when they are going to ship you their requests for data and the way lengthy you’ll have to present it.
For a small finance crew, I at all times suggest a staged strategy, leaving time between the auditor’s pattern choice (the transactions they are going to take a look at) and their testing of these transactions, so that you’ve got time to drag collectively the knowledge they want. Construct in time through the testing part for comply with up questions round different key duties equivalent to your personal month finish course of.
After the audit
Your auditor will flag any vital weaknesses in your processes and controls they establish and provide you with suggestions to handle these. This generally is a roadmap to future enhancements, serving to you mitigate dangers equivalent to fraud and likewise any areas of publicity equivalent to contracts not being signed or correctly in place, previous debtors not being adopted up, and so forth. Good controls additionally provide you with extra consolation by means of the 12 months that your numbers are proper, and you realize the place you might be.
Lastly, audit needs to be a year-round relationship. Get in contact together with your auditor if there are massive modifications are on the horizon, i.e. enlargement, new income stream, new financing, antagonistic occasions as they know your online business inside out and generally is a precious supply of recommendation.
Debbie Jakeman is a accomplice at Mercer & Gap.
Learn extra
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