Financial audits – understanding the costs and timescales

Audits are an important statement that a business must produce for regulatory bodies to use. 

What is an audit?

An audit evaluates a business’ financial statements. Typically, these audits will be conducted on an annual basis. Although they can be conducted by an internal employee, its recommended that you use an independent professional company to carry out an unbiased, comprehensive review of the business finances.

An annual audit is essential and provides an independent assessment of your financial records and processes, and importantly can give you practical advice to improve your business.

How much does an audit cost?

The cost of an audit can vary depending on the audit company being instructed to carry out the review. The final bill will depend on many factors including the quality of information made available and the complexity of the investigations needed to be able to produce the full range of financial statements

However, the price of audit fees increased significantly between 2010 and 2016 from £5.92 billion to £7.16 billion.  

Over the few years some businesses say that their auditing fees have increased by as much as 20%, whilst a handful of companies say theirs had decreased. This shows that the price can vary from business to business depending on the complexity and time needed to complete a full financial audit.

How is an audit completed?

Firstly, you’ll need to find a reliable auditor to help conduct your audit. During this stage you will discuss your needs with the auditor and agree on the timescales and overall cost to produce the audit.

Financial documents will need to be gathered and provided to the auditor. This will include documents relating to all company income and expenditure, including sales receipts, bank and credit card statements, and invoices. This information should be provided in a timely manner and should be as transparent as possible to be able to draw up an accurate representation of the business and its financial standing.. 

The information will then be tested to see if it supports the outgoings and incomings of the business and whether there are any variants that they should be aware of. 

The auditor will also evaluate the internal control system of the business and suggest improved procedures for any areas they deem to be lacking. This will help a business to understand the areas in which they need to improve to improve its financial well being.

How long does it take?

For a typical business the planning of the audit might take a few days to conduct, however for larger more complex businesses it can take weeks or even months. This will involve the gathering of the information and meeting with the audit team to discuss further steps. If the initial pre audit is accepted by both parties an agreement will be signed before then official detailed audit will begin.

Be aware that first time audits will take longer than follow up annual updates, simply because the auditor will need to understand the client’s business from scratch before performing the number crunching required. 

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