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 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”. 

How important are investors for emerging businesses?

In order to successfully encourage investors, early stage businesses that are seeking funds to grow with will need to dedicate a lot of time towards providing a reliable and accurate audit. Not only that, the likes of a credible management team, a business model, robust systems, and a good trading history will also help paint your business in a positive light. Furthermore, a statutory audit will help enhance an investor’s views on the company and confirm that the management is thorough, transparent, can operate with a heightened level of integrity, and is willing to be open to scrutiny.

It’s common for businesses in the early stages to become carried away with sales and products. Although this is of high importance, they must also monitor their systems, processes, reporting, accounting, and compliance, at all times. The likes of a statutory audit will help all businesses achieve this. Investors could be intrigued by the idea of your business in theory, but the comfort and reassurance they get from the management team will be the ultimate determinant whether they invest or not. 

Source: Wisteria Accountants

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Darie Nani
Darie Nani

Aiming to inform, educate and sometimes amuse.

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