Statutory audits have traditionally been seen as an onerous and unavoidable part of running a business and many companies have undertaken audits simply to comply with relevant guidelines rather than as part of their strategic business planning. Whilst a statutory audit is essential for some businesses, many businesses are now realising the importance and value of conducting audits regardless of whether they are forced to via legislation.
The recent economic downturn and crisis within the banking industry has led to calls for audit reforms and many potential changes have been discussed. The various proposed changes have faced criticism from auditors who fear the requirements of the client are in danger of being overlooked due to the regulation controversy. Auditing firms are keen to ensure industries face appropriate regulation and businesses comply with relevant legislation but also that clients obtain true value from an audit and are able to act upon the results. By gaining a commercial benefit from audits, in addition to satisfying compliance requirements, businesses are more likely to commission audits on a voluntary basis rather than only instigating them when instructed to do so.
In addition to a business audit, auditing firms also offer internal audits for clients who wish to gain an insight into the running of the business and obtain data. A key element of an internal audit report is risk analysis. By identifying the risks faced by the business, the management team are able to respond appropriately and lower or avoid the risk entirely. By doing so they cut costs and increase the company’s profitability.
The recent requirement for AIM listed companies to adhere to International Financial Reporting Standards has increased the burden on the businesses affected. Whilst some companies have in-house resources, the increased workload in conjunction with the use of new guidelines, is simply too much for many businesses to cope with. Instead they are relying on auditing companies to provide advice and information regarding their new obligations or are engaging an auditing company to undertake the conversion to the new International Financial Reporting Standards. This highlights how essential auditing firms are to businesses. In addition to carrying out statutory and voluntary audits, they provide invaluable resource for companies which require additional support.
As proposals are introduced in response to recent economic events, there is likely to be increased debate regarding current regulations. In upcoming years there is likely to be additional guidelines as well as legislative reforms. Rather than focusing solely on regulation, auditing firms have a unique insight into the client’s requirements and are ensuring that any action undertaken ensures they meet their obligations but also that they gain commercial insight and advantage from the activity. They can offer advice and assistance prior to the introduction of new regulations to ensure clients are ready for upcoming changes and that the business can implement changes in advance of statutory deadlines.
Whilst changes to regulation may be unavoidable, by commissioning regular audits companies can stay on top of potential risk areas and ensure their business is operating effectively and legally. Historically, businesses may have appointed auditors merely to adhere to compliance requirements but many now recognise the true worth of audits. In addition to fulfilling their statutory requirements, clients are gaining and insight into their own business as well as their industry as a whole. As industries are now being subject to changes to regulation, increasing tax liabilities and additional scrutiny, it is vital that businesses use audits to gain a true commercial advantage as well a fulfilling their many legal obligations.
Baker Tilly is an independent firm of chartered accountants and business advisers, positioned as one of the leading mid-tier accountancy firms. Baker Tilly specialises in all areas of auditing to corporate organisations, including Statutory audit solutions, internal audit reports, business audits and public sector audits.
For more information, please visit: www.bakertilly.co.uk/services/audit/statutory-audit.aspx