Smaller businesses in the UK are not required to be audited, which may seem like a relief to small business owners, who will not have the extra red tape to wade through.
To qualify as a business that does not need to be audited, at least two of the following criteria must be met:
- An annual turnover of £10.2 million or less
- Assets that are worth no more than £5.1 million
- 50 or fewer employees on average
However, despite the temptation to avoid it, there are several benefits for smaller businesses to request voluntary audits.
Increased credibility and trust
One of the key benefits of a voluntary audit for businesses is that financial statements are given extra credibility.
An independent auditor’s report provides assurance to stakeholders, including investors, lenders, suppliers, and customers, that the financial information presented by the company is accurate and reliable.
This can be particularly beneficial for small and medium-sized businesses (SMEs) seeking to secure funding or attract new business partners.
Securing finance
Lenders and investors often require audited financial statements as part of their due diligence process.
By voluntarily undertaking an audit, SMEs can demonstrate their financial health and operational efficiency, making it easier to secure loans or attract investment.
For SMEs, this extra financial backing can be crucial when they are looking to scale up their operations.
Identifying operational inadequacies
An audit is also an opportunity for businesses to review their operations.
Auditors can help identify areas of inefficiency or risk, providing valuable insights that can lead to improved operational performance.
This can result in cost savings and increased profitability for SMEs.
Compliance benefits
While many SMEs in the UK are not legally required to have an audit, they are still subject to various compliance requirements.
A voluntary audit can help ensure compliance with these regulations, reducing the risk of penalties or legal issues down the line.
It can also prepare SMEs for a mandatory audit, should they cross the audit threshold in the future.
Enhancing value of the business
Audited financial statements can increase the value of a business, perfect for any business owner looking to sell or seek a merger.
The audited statements provide potential buyers or partners with confidence in the financial health of the business, potentially leading to a higher sale price.
While a voluntary audit may seem like an unnecessary expense for SMEs, the benefits it offers can far outweigh the costs.
From enhancing credibility and opening doors to financing to identifying operational inefficiencies and ensuring compliance, a voluntary audit can be a useful tool for growth and success.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.