How to Prepare for Your Client’s First Audit: 3 Top Tips for Independent and Freelance Accountants
Auditing can be a very intimidating task for new businesses.
This unavoidable process is mandated by the UK government under the Companies Act 2006 and, while some approach the lengthy processes independently, many others seek professional guidance. For independent accountants, supporting clients through their first audit needs to be undertaken with care and professionalism.
With careful preparation, audits instil confidence in young business clients. Below, we’ve outlined some of the most essential steps to help accountants prepare a business for their first successful audit, ensuring full compliance and total satisfaction.
- Understand audit objectives
An audit refers to the evaluation of business records.
This extensive check must prove that all financial statements indicate an accurate representation of company activities and that all processes are compliant. Remember, your clients will need to inform HMRC that they’d like to use your accounting services. A business should expect to be audited if:
- Its net asset worth is £5.2 million or more
- It has more than 50 employees
- Company turnover exceeds £10.2 million annually
Even a business below these thresholds might need to prepare for an audit if it is owned by a larger firm which breaks at least two. However, businesses may also choose to undertake an audit voluntarily. Some businesses elect it to appease a particular investor.
- Get organised and transparent
Getting ready to start an audit involves coordinating with the client and establishing your own position too. Prepare an audit checklist and try to keep your own records updated throughout the year to avoid mounting pressure during the audit. If you have team members within your accounting firm, make sure they’ve been assigned clear responsibilities.
You should document all audit procedures and findings from the beginning, while you may also be able to look at appropriate accountants’ insurance as an extra layer of protection. As an independent finance professional, it’s critical to make sure that you are safeguarded against compliance issues.
- Review your client records
Thirdly, remember that the pre-audit review will help to ensure accurate reconciliation. Accounts need to be clear, with evidence of bill payments, employee expenses and collected invoices. Prepare to request and collate the required documents, which may include:
- Evidence of company ownership and structure
- List of debtors and creditors
- Balance sheet breakdown, including invoices and accruals
- Payroll records
- Basic accounting records
- Leasing or purchasing agreements
- VAT returns and other workings
Communicating change
Lastly, once you’ve gathered all the relevant information, you need to plan and communicate a realistic timeline with your client. Keep them informed of your progress and document any urgent issues immediately, scheduling periodic meetings to discuss your findings and address concerns.
From there, you can be proactive with your client. Consider non-financial changes that could improve their situation and answer any relevant questions before their year-end audit is due. With your expertise, companies can thrive in the most competitive markets
