If you feel that the process of being audited has got more difficult in recent years, then you’re probably correct. It’s not necessarily your auditor’s fault, though, as the regulatory environment continues to get trickier, and auditors can often be completely prohibited from supporting in some areas. Risk and requirements have significantly increased and so auditors need to do much more onerous testing to meet their legal requirements.
The benefits of strong audit challenges
Following on from high-profile failures (Carillion, Patisserie Valerie, etc.), the reputation of audit was in the doldrums. Regulation is intended to improve the public’s perception of audit and reduce the risk of such corporate failures. This is achieved through increased levels of testing, scrutiny over areas such as going concern, and improving disclosures made in the financial statements.
Who is most impacted?
The regulations cover the largest listed businesses down to small private companies. So, while intended to rebuild public trust and give greater clarity to shareholders and stakeholders, these can be onerous for smaller companies (especially those who are listed or have recently been through a major transaction).
In addition, some companies are defined as Public Interest Entities (“PIEs”), or Other Entity of Public Interest (“OEPI”), with additional numbers being brought into scope in the last couple of years. For such companies, auditors are effectively prohibited from providing virtually any support in preparation of the financial statements.
The problem for finance teams
A typical finance team is set up for the daily challenge, not for the preparation of year-end financial statements. The problem becomes more acute when areas of fair value are brought into the picture; areas such as share-based payments, purchase price allocations, and financial instrument valuations need highly specialised support. While a first-time consolidation with all associated disclosures may be significantly outside the comfort zone of the average FC.
Why work with BHP?
At BHP, we have a specialist Financial Reporting Advisory & Valuations team who provide support in exactly this area, including dealing directly with your auditor as and when required to save valuable management time.
This is done through a single port of call, so that support is available on a friendly and flexible basis; we can run a full, outsourced service where we deal with all financial reporting matters and take on financial reporting audit matters directly. We can also help with accounting valuation work, or we can take on ad-hoc advisory pieces. This is typically a lower-risk and more cost-effective solution than trying to bring someone in-house, and our involvement can help to avoid audit overrun costs in respect of these issues.
We work across companies of all sizes, with expertise in listed groups, PE-backed groups, and smaller private companies, across IFRS and FRS 102. Work covers accounting papers on certain matters, accounting valuations, and statutory financial statement preparation.
In all cases, we are unequivocally on your side and can help to take pressure off the in-house finance team as part of the delivery of an effective audit.
For more information, get in touch with a member of our team or call 0333 123 7171.
