There are certain times when an organisation needs auditing. If there are less than fifty employees or the turnover is under £10.2 million, the company is legally required to have an audit. Or, when the entire asset is more than £5.1 million, the same is applied. At this time, a registered auditor needs to perform the audit following the specific standards and codes. The procedure works on finding out material misstatements by opting for methodical testing. Here, transactions and balances are considered. Above all, every listed company in the UK needs to be audited every year.
Again, there are two types of auditing take place: internal and external. It is important to remember that the former is not mandatory by nature. However, a business owner can conduct it for optimising operations. Here, the organisation directs the whole auditing process. And, the external audit is run by a third-party. The professionals run an audit and provide opinion on the financial statements of the company. However, if you are yet to grasp a full understanding of external audit, focus on the next section.
Importance of Auditing
One of the important reasons to run audit is to relieve the stakeholders. Through the facility of auditing in London, the stakeholders can check whether the financial statements are accurate and fair. The need for an audit is based on the company size and the company’s constitution. Additionally, the process can highlight the areas of improvement in business. Eventually, the company can better its performance.
Basically, when a small business grows into a large one, the ownership is divided between various individuals. Audit becomes a way of comforting the shareholders for offering a clear reflection of the company performance. Also, the stakeholders including the banks have an interest in going through the financial statement.
Understand the Auditing Stages
There are usually five stages of audit followed: planning, risk assessment, audit strategy, gathering proof and giving an opinion. After planning the required arrangements in the initial stage, the potential risks are identified. In order to find the probable solutions, certain tests are designed to address the issues. During the test, the adequate proof is collected and the financial statement is fixed when discrepancies are found. Of course, this is executed before releasing the statement. At the concluding stage, the evidence is further assessed. Then, opinion is given for ensuring that the financial statement is free of disputes.
Difference between Internal and External Audit
The basic difference between internal and external audit report is that the former needs to be submitted to the management. On the contrary, the external audit report must be submitted to the suppliers, creditors, government, shareholders and debenture. Generally, the internal audit is conducted on a regular basis but the external audit is only done annually. So, the former targets operational efficiency. Additionally, the second one is more focused on the validity of the financial statement.
So, if you require any help with tax disputes or issues; get in touch with the professional tax investigation specialists London.
Author bio: Liam Burgess is one of the popular tax investigation specialists London who also runs a full-time blog. Here, he talks about everything you need to know about auditing in London for securing more business opportunities.