What is an audit and why is it important to a business?

What is an audit?

The purpose of an audit is for an independent third party to examine the financial statements of an entity. This examination is an objective evaluation of the statements, which results in an audit opinion regarding whether the statements have been presented fairly and in accordance with the applicable financial reporting framework. This opinion greatly enhances the credibility of the financial statements with users, such as lenders, creditors, and investors. Based on this opinion, users of the financial statements are more likely to provide credit and funding to a business, possibly resulting in a reduced cost of capital for the entity.

There are two main types of audits: external audits and internal audits.

Internal auditors are generally employees of the company although some companies will still engage external representatives. Their main role is to provide assurance that an organisations risk management, governance and internal control processes are operating effectively.

Internal auditors will provide the board of directors or senior management team with a report based upon a wide variety of factors such as the reputation of the company growth and their impact on the environment. This report serves as a management tool to improve processes and controls within the business.

External auditors are appointed by shareholders and the auditor will perform their audit in accordance with the specific legislation that the accounts have been prepared under, commonly for incorporated companies in the UK this is FRS 102. Most auditors will have gone through extensive training and obtained one of the four main professional qualifications, who will uphold the integrity of the auditor and ensure that they remain credible to undertake these types of assignments.

An unqualified, or clean, audit opinion means that the auditor has not identified any material misstatement as a result of his or her review of the financial statements.

Assurance Reports

Where a full statutory audit is not required, companies may consider other types of assurance work over the financial position. An assurance review can provide both internal and external confidence over the financial statements and depending on the scope of the work, could cover the full financial position, or just a key area of concern.

There are several factors to consider when deciding on whether or not to take the annual preparation of accounts one step further and to have an assurance review, especially if a full statutory audit has been performed previously.

An Assurance Review will consider and review all aspects of the financial data and unlike an audit will not result in an opinion on the accounts, but it will provide additional level of confidence over the financial statements. A report is appended to the financial statements which will highlight to user that a review has been undertaken. An assurance review is therefore less intensive and more flexible than the statutory audit you may be used to.

The Assurance review will give confidence to the users of the accounts, both internally and also externally. So a potential lender, supplier, Customer or even an employee could be encouraged to see an assurance review report on financial statements.

At Nicholsons our Audit team has the expertise and the knowledge to deliver a full audit across a wide spectrum of businesses and industries.

We will help your business with the following;

  • Identify and resolve commercial issues and improve processes within the business;
  • Secure peace of mind knowing that your statutory obligations have been met;
  • Reduce risk within the business and improve practices within the business by challenging the current processes where necessary;
  • Use our knowledge gained to help you drive your business forward.

If you would like to speak to one of our audit team members, please give us a call on 01522 815100.

 

 

 

 

 

 

 

 

 


In the Spotlight – Becky Ellis Audit Manager at Nicholsons

Rebecca Ellis has been at Nicholsons Chartered Accountants for 11 years. She joined the firm as a Junior Accountant in April 2008 and is based at the firm’s Lincoln office.

After finishing her GCSE’s, Rebecca attended Lincoln College three days a week to do her AAT exams whilst also working for the NHS on the administration bank for 2 days a week. During this time, she completed her AAT levels two and three.

Upon joining Nicholsons, she continued with her training and completed her AAT level four before moving up to the next level. Rebecca took her first ACCA exam in December 2014 and took her final exam in March 2017 becoming a fully qualified accountant. Rebecca’s area of expertise is audit, academies and charities although she also has experience in working on accounts and personal tax work.  She mainly deals with the firm’s larger clients such as Ltd Companies, Charities, Academies and ATOL reporting.

In October 2017, Rebecca was promoted to Audit Manager and works alongside Directors Emma Murray and Jo Brown in managing the audit and compliance assignments.

Rebecca says “I enjoy my work and was delighted with my promotion. It does show that if you work hard this can be recognised.  Although I will still take an active role within the accounts team, my time will be prioritised towards helping us meet our auditing deadlines and client expectations.”

Emma Murray, Head of the Audit and Accounts department, said “Rebecca has come a long way since she started and the team have helped and supported her over the time she has been with the firm, giving her to opportunity to develop the skills, experience and knowledge she needed to help achieve her goals. All the directors recognise the importance of developing and retaining our employees and our aim is to provide our clients with a consistent and recommendable service, which we know that Rebecca and her team continue to do.”

Away from the office Rebecca likes to go on holiday as well as shopping and socialising.

In 2018 she managed to keep a secret from her work colleagues and eloped St Lucia to get married.