Audits explained: understanding the process and its importance

In the dynamic business landscape, financial audits play a critical role in ensuring compliance, transparency, and operational efficiency. However, despite their importance, there’s often a misconception about the true purpose of an audit. It’s not just about scrutinising your financial accounts – it’s about the wider business, looking at both the historic, current and future data, and ensuring the picture the directors are disclosing to the world is a true reflection of the business, from a financial, legal and compliance perspective.

Audits are the mechanism for facilitating a comprehensive review that enables businesses to understand and apply relevant principles across various processes, providing valuable insights into how your business functions.

In this article we explore the multifaceted purpose of an audit, what it truly involves, and key ways in which it enhances your business.

Looking beyond the numbers

While financial accuracy is a core component, audits extend far beyond balancing the books. Here are just some of the core ways an audit benefits your business:

• Ensuring compliance: As industries undergo significant regulatory changes, it is crucial for leaders to understand the underlying principles of these regulations to communicate effectively with their accountants and auditors. This proactive adaptation allows businesses to stay ahead of compliance requirements, rather than scrambling reactively.
• Enhancing understanding: Audits help you grasp fundamental principles that can be applied to different business processes, fostering a holistic understanding of your operations.
• Gaining business insights: Through an audit, you gain a deeper understanding of how your business operates, identifying strengths, weaknesses, and opportunities for improvement.
• Preparing for change: As industries undergo significant regulatory changes, leaders need to be well-versed in their processes to communicate effectively with their accountants and stakeholders.
• Getting a view of the bigger picture: Audits are not just compliance exercises; they offer a broader view of your business’s health and strategic positioning.

The audit process: step-by-step

So how does the audit process actually work? More often than not business owners will admit they may not sure where to start and aren’t aware of how an auditor will actually work with their business.

Understanding how an audit works can demystify the process and highlight its value and so we’ve summarised the typical audit process in 5 steps to help give you a look into what is required and what to expect.

Think of this as a ‘cookie cutter’ approach to audits that is taken as a base and tailored to each business, their industry, unique functions and goals.

1. Planning and preparation: Your auditor will meet with your team to understand your business, its environment, and specific risks. This stage is for gathering preliminary information and setting the audit scope.
2. Internal controls evaluation: After scoping, your auditors assess the businesses internal controls to determine their effectiveness in preventing and detecting errors or fraud. This involves reviewing your policies, procedures, and control systems.
3. Field work: This is the core part of the audit, where auditors examine your financial records, transactions, operations, principles, and supporting documents. They perform tests and analysis to ensure accuracy and compliance throughout the financial systems and wider laws and regulations.
4. Reporting: After completing the fieldwork, your auditors will compile their findings into a report. This report outlines any discrepancies, areas for improvement, and recommendations for enhancing compliance and operational efficiency.
5. Follow-up: Post-audit, auditors may follow up to ensure that their recommendations are being implemented and to address any new issues that may arise.

Verallo uses audits to enhance your business

At Verallo, we believe that audits are more than just a regulatory requirement – they are a strategic tool to be leveraged for business improvement.

That’s why our audits encompass all aspects of your business, not just financials. Taking a holistic approach we review your processes, controls, and compliance with industry regulations.

Tailored insights

We provide customised recommendations based on your specific industry and business needs, helping you to navigate regulatory changes and optimise operations.

Future-focused approach

By understanding your business’s current state, we help you prepare for future challenges and opportunities, ensuring long-term success and compliance.

Continuous support

Beyond the audit, we offer ongoing support and guidance to help you implement our recommendations and continuously improve your business processes.

Get in touch

Understanding the complexities of financial audits and their broader implications can significantly benefit your business.

At Verallo, we are committed to providing thorough, insightful audits that drive compliance, efficiency, and growth. If you’re ready to see the bigger picture and enhance your business operations, get in touch by emailing info@verallo.com or calling 0203 912 9933.