13 Jun 2023

Focus on: Auditing services

Monahans provides a wide range of services that span multiple areas of expertise. Each team member is highly knowledgeable and passionate about achieving the best possible results for their clients. Martin Longmore, Partner, sheds light on the crucial role that the audit team plays in the efficient running of a business.

Which businesses require an audit?
In a nutshell, an audit involves reviewing business accounts and ensuring that they represent what we call a true and fair view. This isn’t just about numbers; it is how the company has got to those numbers. All businesses that are required to have an audit are also now required to publish a ‘strategic report’ that sits at the front of the accounts, which auditors are also required to review.

There are three strict criteria that define whether a company is required to have an audit:

  • A turnover of more than £10.2 million
  • An average of more than 50 employees
  • Gross assets (fixed assets combined with current assets) of more than £5.1 million.

If you tick two of these three boxes, two years running, then you are required to have your accounts audited. However, we also have clients who do not meet the above criteria but who ask to have their accounts audited on a voluntary basis.

To be as efficient as possible, we often offer our audit service concurrently with other Monahans’ services. For example, the team will often prepare the company's statutory accounts and draft their corporation tax computations, while completing the audit work simultaneously. Whilst there are strict rules around what additional services can be provided to an audit client, as long as appropriate safeguards are put in place to ensure that the independence of the audit process is not compromised, this is perfectly acceptable within those rules, and often makes for a more efficient process.

At Monahans, we also have relationships with other smaller accountancy firms locally, who may choose not to be registered auditors themselves. Very often, these firms will complete the statutory accounts and corporation tax calculations themselves, whilst our team conducts the audit.

What makes a good auditor?
Outside of technical expertise obviously, I think in particular it pays to be curious and to be prepared to look under the bonnet: to dig a little deeper if you will. The role goes far beyond simply preparing the accounts: signing off on an audit requires developing an assurance that everything is as you expect it to be – if it is not – you need to understand why.

As an auditor, there is also a requirement to look for fraudulent activity. It’s therefore crucial that the process is taken very seriously and the work done thoroughly

Many clients find the auditing process a hugely beneficial experience – taking comfort in the fact that an outside entity has come in, undertaken a rigorous reviewing process and either deemed their accounting as adequate or has flagged weaknesses in their systems – giving them the opportunity to strengthen them.

Frequently, the drivers of a business will not be accountants and won't necessarily have the expertise to spot issues within their accounts, therefore receiving that additional level of assurance takes a weight off their shoulders. And of course, as a business grows, the risks for the people who own that business also get that much greater – so it becomes increasingly critical to get things right.

How has the profession changed and what changes are on the horizon?
Auditing is a far more complex and highly regulated process than it ever used to be. For example, audit files are subject to separate regulation by our regulator, the Institute of Chartered Accountants of England and Wales (ICAEW) and audit partners have to be registered as such with additional training and regulatory requirements. Audits now carry a lot of reputational weight, as they provide the outside world with a level of reassurance that the accounts are of a certain standard.

We've just gone through a huge level of regulatory change with the introduction of ISQM 1 (International Standard on Quality Management) in December, along with ISA 315. So, we are navigating these changes for the first time with our current audit clients.

Ultimately, any changes to Accounting Standards will have a knock-on impact on us and our processes. We're currently reviewing a new Financial Reporting Exposure Draft (FRED) 82, which is a prelude to a new Accounting Standard. This will impact how numbers are recorded in a set of accounts, when it comes to assets that are leased – a building for example.

Rather than simply recording the rent that a client pays on a building, or on any operating lease, as an expense, clients will instead be required to treat that building as their own asset with a corresponding liability to pay the lease rentals. This will change companies’ balance sheets enormously, once the Accounting Standard is finalised over the next couple of years.

So why should businesses choose Monahans for their audit?
There's nothing we enjoy more than spending quality time with clients, advising them and helping them to improve their business. That's what we’re experts at and what we love to do. Whether that’s improving their systems or helping with their tax liabilities.

We pride ourselves on holding close working relationships with all of our clients – they're not just numbers to us, many we have known and worked with for many years. From client feedback that is what seems to set us apart – our aim isn’t to churn through as many clients as possible, instead we focus on understanding each individual business and delivering a high-quality personal service.

We take our roles very seriously. After all, businesses have put their trust in us to give their accounts an annual health check, so we pour time, resources and care into ensuring that they receive the best quality of service.

At Monahans, we believe that an audit is an opportunity to examine your business and identify ways to add value, to improve systems and to identify areas of risk. Get in touch today to discuss your requirements.

Martin Longmore