Back in the summer of 2020, at the height of the COVID-19 pandemic, Deloitte carried out a survey of senior finance and C-Suite executives to canvas opinions on the role of auditing in financial reporting.
At a time when attention and resources were being stretched to breaking point just keeping operations going, the view on auditing’s place in financial management couldn’t have been more unanimous. 98% of respondents agreed that an audit of a company’s financial statements garnered trust and confidence that the financial reports and accounting systems could be relied on. 62% felt strongly that this was the case.
It’s easy to view financial auditing through a compliance lens only, as something you do as a statutory obligation when required. Financial auditing is a legal requirement for all public companies and for private companies with an annual turnover of more than £10.2m, and/or assets of more than £5.1m.
But auditing brings benefits that reach well beyond meeting statutory obligations, including for organisations that don’t have to carry out audits by law. One way to look at it is to consider that it isn’t just regulators and tax authorities who have an interest in understanding the financial performance of a business. Shareholders, lenders, investors, employees and a range of other people all have a stake. All are entitled to expect that the financial information they are provided with is rigorous and reliable.
The benefits of non-statutory auditing
External auditing of a company’s financial statements and accounts provides a stamp of credibility and transparency. For a start, just the act of bringing in an auditor is tantamount to saying, we have nothing to hide here, we are confident our own financial reporting structures are in robust working order.
That level of transparency goes a long way in maintaining long-term relationships with stakeholders that are built on trust. Reputation carries immense value in business. Companies go out of their way to present a successful image to customers, suppliers, employees, shareholders, investors, partners, competitors and the wider markets. When that image carries external validation, which is what an audit of financial performance amounts to, so much the better.
There are more tangible benefits, too. With regard to shareholders and investors, the stamp of trust and transparency that financial auditing brings can play an important role in winning approval for key strategic decisions that go to a shareholder vote, or supporting fundraising efforts and attracting new investment.
Internally, audited accounts give executive boards and senior leadership teams that extra level of assurance that the financial data they are basing important decisions on is accurate, and that their own internal processes are sound.
Or, turning that around, auditing can also expose areas where financial reporting systems are not as robust as they should be, where mistakes have been made, and highlight opportunities for improvement. Planning ahead based on an inaccurate view of a business’s financial position, or missing warning signs that changes need to be made, will eventually lead an organisation onto the rocks.
To find out more about statutory and non-statutory services offered across the Xeinadin Group, contact us today.
