Audit
An audit is not only a statutory obligation that some business entities may have to undertake, but also an opportunity for us to work more closely with the management and help them get the best from their business.
Following any audit assignment, we issue a point sheet discussing matters relevant to the financial statements as a whole. The primary purpose of the point sheet is to assist the management in their understanding of the statutory financial statements for which ultimately they are responsible. The point sheet provides commentary on the financial statements and the disclosures and also highlights any other issues which although may not be relevant to the audit, will certainly be relevant to the management and their decision making.
In a recent audit assignment for a Kent based client company, the point sheet highlighted two key issues: -
- There were debit balances in the trade creditors listing. From an audit perspective, these balances were not material and did not require the financial statements to be amended. However, these balances had arisen due to the company overpaying purchase invoices and also making payment for invoices when no documentation had been received.
The board of directors were concerned that payments had been made and payments were being made without supporting documentation. The board decided to take immediate action to rectify this position. - Although the client was under no statutory obligation to report on the performance of the business during the year under review, given the fluctuation in turnover and margins, we advised that the business should include a brief synopsis commentary their performance for the following reasons: -
- Although the company is a small company as defined by the Companies Act, it still files full accounts at Companies House for the benefit of its customers. A paragraph on business performance would highlight to them the fluctuation in their turnover and their margins so allaying any concerns regarding the trading position of the company.
- It would assist HM Revenue & Customs when processing the company's corporation tax return form for the year. An explanation in the report of the directors could avoid the need for HM Revenue & Customs to open an enquiry on business performance.
At the conclusion of the audit, the client was left with a feeling that the audit had made a positive contribution to the business and added some value.