Fast-growing businesses may find themselves within the audit cycle sooner than expected. Rather than viewing audit as a burden, they should see the opportunities it has to help them achieve growth plans and beyond.

For financial years commencing on or after 6 April 2025, the threshold for requiring an audit is meeting two of the three criteria for two consecutive years:

• An annual turnover greater than £15 million
• Total Assets greater than £7.5 million
• 50 or more employees on average

It’s important to note some types of business require an audit regardless of these qualifiers and a business must have an audit if shareholders who own at least 10 per cent of shares ask for one.

From 1 January 2026, almost all commercial leases will need to be capitalised and recognised on the balance sheet which will result in an increase in gross assets, tipping some businesses over the threshold sooner than expected.

Get the most out of your first audit

Start early as it’s important to find the right auditor for you – they are a resource to help your business grow.

Find an auditor with strong technical expertise and experience, but also the right personal characteristics to facilitate high quality conversations with you so that you can be confident they understand your business and future plans.  This is not only fundamental  for a high-quality audit, but also in supporting you to plan ahead and access advice at the right time. 

Practical audit preparation

• Organise financial records. Make sure all financial records including income, expenses, assets and liabilities are up to date. A detailed general ledger should be available showing all transactions.
• Get supporting documents ready – bank statements, invoices, receipts and contracts. Be prepared to access older records.
• Reconcile accounts. Perform monthly reconciliations for all balance sheet accounts, e.g. bank, debtors, creditors, fixed assets, stock and understand what any reconciling items are and be able to support them with underlying documentation.
• Stock count at year end. Plan operationally as you need to count and auditors need to attend and do a sample count.
• Auditor should issue you with a prepared by client list. Better to ask than guess what they want so you have time to respond. Collaboration is key.
• Logistics
  • Appoint a person responsible internally as key contact with your auditors to drive the audit prep and timetable.
  • Let internal stakeholders know what the audit is and what might be required of them.
  • Support your team – it should be a collaborative process internally too.

A good auditor will plan the audit well and spend time with you to understand the business, your processes and controls to be able to correctly determine the key risks in the business. Audit work is focussed on the key risks. This is designed to make the audit robust, efficient and high quality, helping you get most value for your money. 

Practical things like a site tour are helpful. Also prepare by being clear on what your processes are, who does what, what your controls are (for example authorisations on payments, invoices and key transactions,  passwords and access to banking and IT systems and any internal reviews of the numbers and reconciliations).

Discuss any key judgements and estimates early before the audit and have upfront conversations about accounting policies for critical areas like revenue recognition. This helps prevent surprises later once your numbers are finalised and being audited. Be clear on your estimates for stock provision, bad debt provision, etc., and why you’ve come to number.

At the early planning meeting, the auditor will explain where they see the risks, work to be performed and the timeline. This is where it’s really important you agree expectations. I would advise you agree key milestones of not just when the auditors will perform the work but for your own planning, when they will send you their requests for information and how long you will have to provide it. 

For a small finance team, I always recommend a staged approach, leaving time between the auditor’s sample selection (the transactions they will look at) and their testing of those transactions, so that you have time to pull together the information they need. Build in time during the testing phase for follow up questions around other key tasks such as your own month end process. 

After the audit

Your auditor will flag any significant weaknesses in your processes and controls they identify and give you recommendations to address these. This can be a roadmap to future improvements, helping you mitigate risks such as fraud and also any areas of exposure such as contracts not being signed or properly in place, old debtors not being followed up etc. Good controls also give you more comfort through the year that your numbers are right, and you know where you are.  

Finally, audit should be a year-round relationship. Get in touch with your auditor if there are big changes are on the horizon, i.e. expansion, new revenue stream, new financing, adverse events as they know your business inside out and can be a valuable source of advice.

Debbie Jakeman is a partner at Mercer & Hole.

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