How Important Are Company Audits for Businesses in the Early Stages?
In order to help a business monitor and reliably measure the financial situation of a company, a regulatory statuary audit […]
In order to help a business monitor and reliably measure the financial situation of a company, a regulatory statuary audit is vital. Not only does an audit help present a business’s monetary situation in a true and fair manner, but it also provides clarity and comfort to stakeholders that the company has adopted appropriate accounting policies and methods.
Understanding the scope of an audit
Although statutory audits can take a variety of different forms depending on the scale, complexity, and nature of your business, one may be considered more appropriate than the other. Put into some context, for a small retail company an audit will most likely be focused on stock valuation, margins, and receipts. Alternatively, an audit for the likes of a large property investment company will largely focus on property valuation, funding, and systems.
When presented to potential investors, an audit report can do more than just clarify a business’s financial situation — it can also offer the reassurance needed for investors before they make their final decision.
Furthermore, there are multiple benefits of supplying investors with an audit report, some include:
- Compliance — for business owners, shareholders, and potential investors, showing conformity to an audit process is one way to show investors that a company is credible and transparent.
- Improves planning, budgeting, and forecasting — since statutory audits give credibility to historic numbers, this information can be used to forecast ahead and ultimately limit the potential financial risks a business might face.
- The credibility given to financial statements — the main purpose of an audit is to verify that the financial statements are true and fair thus helping to build trust with an investor.
When an investment decision is being made, all investors and entrepreneurs know that business transparency is key. Audits can ultimately help increase the confidence that investors have through the reassurance provided by the audit.
Stressing the importance of audits is Andrew Millet from Wisteria Accountants, saying: “Any company that is seeking investment over the next few years should be thinking of voluntarily having themselves audited. Leaving it until the year of investment is often too late”.
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