Indie Dev’ Guide 14: Benefits of an Audit
- Indie Dev Guides Introduction
- Guide 1: Limited Companies
- Guide 2: Personal Tax
- Guide 3: VAT
- Guide 4: Payroll and Workplace Pensions (Auto Enrolment)
- Guide 5: Digital Tax Accounts and Software
- Guide 6: Funding your Prototype
- Guide 7: Corporation Tax
- Guide 8: R&D Tax Relief
- Guide 9: Video Games Tax Relief Claims
- Guide 10: Understanding your Accounts
- Guide 11: British Film Institute (BFI) certification
- Guide 12: Business Expenses
- Guide 13: Withholding Tax on overseas income
- Guide 14: Benefits of an Audit
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An audit is an independent and professional service which will report on whether the financial statements are true and fair. An audit can help improve the information managers, directors and owners receive with which they make important day to day business decisions. The accountant will issue a conclusion on the financial statements in the form of an audit report which is included as part of the accounts.
A company will be required to have an audit if it exceeds two of the following three thresholds:
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Some companies must have an audit even if they are under these thresholds. These include banking, insurance and public companies. It is worth noting that small companies in a group which include a UK public company can claim the small company audit exemption although there are strict criteria and certain reporting requirements to be met.
An audit of a company will continue to bring greater shareholder confidence as well as promoting sound financial practice and controls. An independent view can act as a deterrent to fraud, tax evasion and company mismanagement and auditors have an important role in supporting small business and helping them grow.
Due to company law changes brought about by Brexit, a previous audit exemption that was available to the UK subsidiary of an European Economic Area (EEA) parent company is no longer available for accounting periods commencing on 1 January 2021. Therefore, UK registered subsidiaries with an immediate EEA parent will need to have their accounts audited for financial years that begin on or after 1 January 2021.
These subsidiaries should also check whether they will maintain their eligibility for exemption from producing group accounts for financial years beginning on or after 1 January 2021. Intermediate UK parent companies with an immediate EEA parent may need to produce their own group accounts and file them with Companies House. This is unless they benefit from the exemption by other means – for example, because their EEA parent produces group accounts that are equivalent to those required by UK law.
- a closer look at a business through the eyes of a skilled business professional.
- ensures users are more confident that the information is reliable.
- gives more credibility to business reporting processes.
- facilitates the running and management of the business.
- advice and recommendations will be given during the process.
- im proves business processes.
- aids the process of obtaining finance.
- assists management in understanding and reducing business risks.
- better controls can increase profit.
- gives more confidence in internal controls.
- More valid conclusions can be drawn from the accounts.
Innovate UK Independent Accountants Report
Innovate UK, part of UK Research and Innovation, is a public body funded by grant aid from the UK government that help businesses develop their idea by issuing grants to support the added cost of realising their potential.
An important part of obtaining any grant is a requirement for the business to engage an independent accountant to perform a reasonableness check on the expenses spent by the business in line with the terms of the grant and to report their findings to Innovate UK.
Innovate UK requires that the independent accountant must be a registered auditor as listed at the audit register and Innovate UK reserves the right to approve the selection of the independent accountant as necessary.
It is important to note that the business is responsible for maintaining proper accounting records which comply with the terms and conditions of Innovate UK’s grant offer and is also responsible for providing this information to Innovate UK as per the terms of the grant.
The independent accountant will review the accounting records, correspondence and obtain any information or explanations considered necessary to be able to perform the work to the required standards expected by Innovate UK and the auditing profession. The business must accept that they have a responsibility to provide the independent accountant with full access to its financial records and ensure that all explanations are supplied in a truthful and timely manner.
The independent accountant must ensure that they undertake the work required of them with reasonable care and skill that would be expected of a registered auditor. Innovate UK also requires the independent accountant to carry out specific procedures.
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