How to prepare for your first audit

Aug 31, 2022 | Business, Tax

If you’ve hit the turnover threshold, or you’ve decided an audit is right for your business or charity, there are a few things to think about before you get started.

Taking the time to prepare will help to produce a smooth and thorough audit which can yield many advantages, including:

  • Compliance with financial regulation.
  • An accurate picture of your finances, allowing you to create a business strategy based on reliable information.
  • Proof to customers and shareholders that you are committed to financial transparency.
  • Helping to secure a loan or investment.
  • Flagging up weaknesses in your business model, giving you a chance to address them before it’s too late.


Choosing an auditor

At the start, you will of course need to choose an auditor. You’ll be seeing a lot of them, so it’s important not to rush this process. Things to consider include the qualifications, experience and reputation of each firm. You could also seek testimonials from previous clients and research the ongoing performance of companies they have audited.

Factor in, too, fees and whether the values and personality of the firm will be a good fit for your business.

Once you have chosen an auditor, you should discuss your goals for the audit. As well as spotting discrepancies in your accounting, an auditor will compile a list of recommendations for the future. By making it clear what you hope to achieve, you can ensure that these are as relevant as possible.

Good communication between company and auditor is vital, so someone with authority should be the main point of contact. You can put a single employee in charge of everything, or select different people for different areas of the business.

Be sure to consult rotas and holiday plans in order to avoid scheduling clashes, and brief key members of staff on when they need to be available.


Preparing your records

The process will go far more smoothly if you have prepared your financial records for the auditor in advance. Doing this will minimise the disruption to your employees and help the auditors work efficiently.

Before you can do this, you need to find out the time period that the audit will cover. If the audit is voluntary, you can decide this yourself. If it is compulsory, it will be decided for you. An audit will usually cover 12 months of accounts, although there are exceptions to this.

Once you know which accounting period to focus on, you can begin to compile the necessary records. These should include:

  • Details of company ownership
  • Bank statements
  • A list of creditors and debtors
  • Records of wages
  • P11D forms for any employees who receive taxable benefits
  • Your balance sheet
  • Your inventory list
  • VAT returns
  • Details of leases or hire purchase agreements

Before the audit starts, it would be good practice to create a separate auditor file. All correspondence with the auditor should be kept here in case you need to refer back to it.


We’re here to help 

The audit process should go smoothly once you are well prepared. Whether you’re looking for an experienced auditor, or just want to find out more, give us a call.

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