Jacqui Waring of Goringe Auditors Limited has prepared this handy guide to statutory audits: what they involve, why they matter and who needs them.
What is a statutory audit?
It’s an independent confirmation that a company’s accounts show a true and fair view, and meet all necessary accounting requirements. It started as a requirement for listed companies to give investors confidence in the company’s accounts. It is also required for certain private companies and although the audit report is addressed to the shareholders, accounts that have been audited often add confidence to lenders, customers and suppliers.
How is an audit carried out?
Once we have their draft set of accounts, companies provide us with access to their accounting systems and other reports (e.g. debtors, creditors and bank) and access to any staff we need to complete the audit. We usually spend a couple of days at the company’s offices to check thoroughly each material line of the financial statements. We review the company’s controls and processes and we carry out sample checks to ensure the figures are accurate.
What’s the final outcome?
When we submit the final set of accounts to Companies House, we include an audit report signed by us giving our opinion on the financial statements. Following this, we send a management letter to the client, outlining any findings or recommendations we have to improve controls and processes.
When does the audit need to take place?
A company’s accounts need to be filed 9 months after the year end, so we recommend that we start the audit process as soon as possible after the year end.
Who has a statutory obligation to be audited?
Companies who fall into any two of the following groups: over £6.5m turnover, over £3.26m gross assets and an average of 50+ employees. Pension funds also require an audit and client monies accounts audits are required for solicitors and estate agents who hold client monies. Sometimes a bank or a shareholder might request an audit, too.
Why are pension funds, solicitors and estate agents singled out?
Solicitors require a client monies audit under SRA Accounts Rules 2011 and The Pensions Act 1995 requires all occupational pension schemes, unless exempt, to be audited by a registered auditor. Lettings agents may be required to have a client monies audit if they are members of a body such as the National Association of Estate Agents (NAEA) or the Institution of Commercial Business Agents (ICBA).
Who audits the auditors?
We were awarded our registration certificate by the ICAEW — one of the bodies that govern financial audits in the UK — which means we’re qualified to offer audits of financial statements. The QAD (quality assurance department) of the ICAEW will carry out regular compliance reviews to ensure Goringe Auditors Ltd. is meeting all the relevant regulations.