A Step-By-Step Guide To Understanding The Company Audit Process

Published Monday, 28th June 2021
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Many companies in the UK are overwhelmed by the thought of an audit — mainly because they don’t know what the process entails.

However, Accounting and Auditing is a £5.6 billion industry in the UK as of 2021, and there’s a good reason why. A company audit promotes financial compliance, fosters positive relationships with investors, and provides constructive feedback. In some cases, the audit is also required by law.

Given these circumstances, we’d like to make sure you understand exactly what the process of a company audit in the UK entails.

Step 1:

The audit team assess your company and determines the right approach

Every company audit is slightly different. It all depends on the size of the company and the industry it operates within. Keeping that in mind, the team will make sure that the audit is relevant and specially catered to your company profile. 

Step 2:

The audit team gains an in-depth understanding of your accounting systems and reviews financial statements

It’s incredibly important for the audit team to gain a clear understanding of the business, including the accounting systems. Although most companies tend to manage their finances in a similar fashion, the audit team must ensure that they have access to all the relevant information and review it as accurately as possible. This often entails collaborating with the company’s internal finance department

Step 3:

The risk assessment process begins

Risk assessment is a critical aspect of the auditing process. The idea of a “risk-based” approach prioritises the areas that are most at risk of material misstatement, including financial records. This allows the team to detect errors in financial statements and system processing. Audit testing can include analytical work, enquiries, system walkthroughs, and transaction testing. Smaller sample tests are completed to gauge how the company operates at large.

More so, the audit team will have the knowledge to address matters as serious as fraud. To be clear, if there are honest errors in the financial records, the company will not be treated in the same manner as a business committing blatant fraud. Ultimately, the end goal is to determine whether the company’s financial records genuinely reflect its position.

Step 4:

The audit report is issued

Once the audit team has completed all necessary processes, they will issue an audit report to the company and relevant stakeholders. An ‘unqualified’ report serves as an assurance that the company’s financial position holds true. There are no significant errors and the company is deemed financially credible.

On the other hand, a ‘qualified’ report suggests that there are discrepancies that need to be looked into. We often associate the word “qualified” with good news, so make sure you don’t get confused.

Although there are many more intricate details surrounding the company audit process, we hope this general overview was helpful. If you’re still feeling uneasy about the process, there’s no need to worry. A qualified audit team will be there to guide you, ensuring that you know exactly what’s happening as they go along.

If you’d like to find out more or explore our audit services further, please get in touch and a member of our specialist team will be more than happy to help.

COPYRIGHT © 2021 CALDWELL PENN LIMITED   |   Company Reg Number: 03872209   |   ICAEW - Institute of Chartered Accountants in England and Wales: C005061064