Many SMEs view the rising audit threshold as a
welcome opportunity to opt out. But according to Robert Glazer, it
can bring welcome business benefits
At the next budget, the audit threshold is likely
to increase, removing the need for companies whose turnover is less than
?5 million or thereabouts, and many directors may take the view
that an audit is now unnecessary. On the flip side, those companies that
remain above the audit threshold often view the audit as a "grudge
buy", a necessary evil that is hardly blessed at the outset. But
the audit function, approached positively, can turn out to be beneficial.
A basic plus point of any audit is that it allows
objective professionals to review
the financial performance of the business. The key
to making this information valuable is to work with the auditor to go
beyond the minimum compliance function and use the audit to develop
management information that challenges the business strategy and
processes.
Interpreting information
An auditor's role is not that of just ticking
check-lists and producing historical information that is not really
relevant to the business's forward strategy. It
is all about interpreting the information to help make fundamental
commercial decisions on issues such as funding, risk minimisation and
performance improvement.
In addition, the audit should be there to provide
comfort to those companies who employ financial directors, as it will
provide detailed information on the performance of those people.
A direct financial benefit of the audit can be the
identification of unclaimed VAT, supplier overpayments and areas of
capital allowances. In these instances the audit is acting as a company
healthcheck rather than merely a report on the previous year's activity.
Going beyond numbers
So how should companies plan to get the best from
their auditor each year? A good auditor will go beyond the numbers and
challenge the business processes using management information derived as
part of the audit. Communication is vital to this process, so if your
auditor is not switched on in this respect you need to seek to develop
the relationship. This means you are providing as much information as
you can well in advance of the audit and throughout the year on an
on-going basis, explaining what you want to achieve. For example,
outline that you expect the audit to help improve business processes in
areas such as customer care, IT and personnel management.
With the implementation of IT in most firms, this
should be an easier objective to achieve, as auditors can process the
numbers more efficiently, enabling them to spend more time with you
working at the heart of the business. It's also important that you have
a relationship with an auditor that understands your business and
industry sector: one aspect that clients value in their professional
advisers, is the in-depth knowledge of the sector in which they are
operating.
Remember as well, that getting the best from a
business owner/auditor relationship is about give and take. You need to
be prepared, in advance, to give your auditor all the information they
need to take a proactive approach in their advice to you. The audit is
a powerful tool once the information is pieced together. The easier this
is to achieve, the more likely you are to have management information
that is current and valuable. •
Robert Glazer, is managing partner at Glazers
Chartered Accountants in London
