MANY MID-TIER FIRMS are pushing for a higher SME audit threshold, but one partner has warned the value of the annual checks should not be dismissed for the sake of simplicity.
Andrew Watkin, partner at Baker Watkin, has outlined several reasons businesses ought to be wary of relinquishing their audits, saying less experienced directors should be most concerned.
Investment in audit “can pay for itself”, he suggested, highlighting weaknesses in structural and operational systems, and potentially flushing out fraud. Experienced managers can also count the return on their investment, as those seeking to sell their business will find buyers willing to pay more on the back of an independent audit.
Even companies not looking to sell might find an audit pays dividends, Watkin claimed, as it can “help identify tax adjustments which, undetected, could lead to interest penalties and tax investigations”.
There is no doubt that audits have become more complex, Watkin conceded; but this is due to increasing sophistication, more planning and less box-ticking, meaning the value has increased accordingly.
Mid-tier firms calling for a higher audit threshold are looking to replace the review with services such as risk management and internal control advice, saying this will add value in a more targeted way. However, these checks are part and parcel of a full audit, and the more robust review has the added bonus of identifying unlooked-for weaknesses; this can lift an SME from mediocrity to success, making the money and man-hours well worth it.
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