Let’s talk about audits. They’re not the monster under the bed that many business owners imagine. In fact, they’re useful tools that verify your numbers and often help you run a tighter business.
In this guide, we’re cutting through the jargon to give you the plain facts about business audits in 2025.
You’ll learn whether your company needs one, how to get ready without any last-minute rush, and what auditors actually look for when they examine your books.
When Does Your Business Need an Audit in 2025?
The rules have changed for financial years starting on or after 6 April 2025. Your business may now be exempt from requiring an audit if it meets at least two of these criteria:
- Annual turnover of no more than £15 million (up from £10.2 million)
- Balance sheet total of no more than £7.5 million (up from £5.1 million)
- 50 or fewer employees on average
This increase in thresholds means thousands more businesses can now skip the audit process, saving both time and money. However, even if your company falls under these thresholds, you’ll still need an audit if:
- Your company’s articles of association specifically require one
- Shareholders who own at least 10% of shares request one (in writing, at least one month before the financial year-end)
- You’re a public company (not dormant)
- Your business is a subsidiary (unless specific exemptions apply)
- You operate in financial services, including banking, insurance, or e-money
- Your company is involved in regulated financial activities
For many businesses, the decision to have an audit doesn’t merely revolve around the legal requirements.
Voluntary audits provide credibility to your financial statements, which can be extremely valuable when seeking investment, applying for loans, or preparing to sell your business. They also help identify weaknesses in your financial controls before they become serious problems.
Different Types of Business Audits
Not all audits are created equal, and as noted, you don’t have to wait until they’re legally obligatory to conduct one. Here are the main types:
- Statutory audits are the legally required examinations we’ve discussed above. They follow strict standards set by regulatory bodies and must be conducted by registered auditors.
- Non-statutory audits are voluntary examinations that don’t need to meet all legal requirements but can still provide valuable insights. These might be requested by your board, investors, or potential buyers to gain assurance about specific aspects of your business.
- Internal audits are conducted by your own team or consultants you hire directly. They focus on improving your internal processes and controls rather than providing independent verification to external parties.
- External audits are performed by independent accountants with no ties to your company, giving them the objectivity needed for statutory requirements and third-party assurance.
Many businesses also undergo special-purpose audits that examine specific areas like IT systems, tax compliance, or grant funding. These targeted examinations address particular concerns rather than reviewing all financial statements.
Be aware that charities also have different audit requirements.
As noted, it’s very common to conduct audits before major business milestones like raising funding.
You’ll need to lay out your accounts transparently to help anyone from banks to venture capitalists and angel investors truly understand your business, which an audit enables.
How to Prepare for an Audit: Your Checklist
Regardless of why you’re choosing to have an audit, proper preparation makes audits less stressful and more useful.
Start by creating a timeline that works backwards from your filing deadline, allowing plenty of time for each stage.
Here’s a quick guide:
Three Months Before
Start gathering your documentation. This includes:
- Complete financial statements (balance sheet, profit & loss, cash flow)
- Bank statements and reconciliations
- Sales and purchase ledgers
- Fixed asset register
- Stock records and valuations
- Major contracts and lease agreements
- Board minutes and company secretary records
- Prior year audit reports (if applicable)
The auditor should help you work out what you need; consider engaging an accountant to help out.
One Month Before
Review your financial controls. Auditors will check whether your business follows proper procedures for handling money. Make sure you can demonstrate:
- Clear approval processes for purchases
- Separation of duties for financial tasks
- Regular reconciliations of accounts
- Proper documentation of income and expenses
- Controls over access to financial systems
Two Weeks Before
Prepare your team. Brief everyone who might interact with the auditors about what to expect and ensure they can access any needed documents. Set up a comfortable workspace for the auditors with access to your systems and files.
What Do Auditors Actually Look At?
Understanding what auditors focus on helps you prepare the right areas of your business. While every audit is different, most examine these key elements:
Revenue Recognition
Auditors pay close attention to how and when you record income. They’ll check whether your revenue appears in the correct accounting periods and follows accounting standards.
This means examining sales invoices, contracts, and delivery notes to confirm when work was actually completed.
For businesses with long-term contracts or subscription services, this can be particularly complex. Make sure you can explain how you recognise revenue over time and have documentation to back up your approach.
Expenses and Purchases
Your expense procedures get scrutinised to ensure all costs are legitimate business expenses and are recorded in the proper period.
Auditors typically select a sample of transactions to examine in detail, tracing them from initial purchase orders through to payment.
Common issues include missing documentation, expenses recorded in the wrong period, and personal expenses mistakenly claimed as business costs. Regular internal reviews can identify these problems before auditors do.
Assets and Inventory
Physical assets often represent a significant portion of your balance sheet, so auditors verify they exist and are valued correctly.
For inventory, they may analyse stocktakes or conduct their own counts. For fixed assets like equipment and property, they’ll check ownership documents and inspect major items.
Depreciation calculations also get reviewed to ensure they’re reasonable and consistently applied. Having a comprehensive fixed asset register with purchase dates, costs, and depreciation records makes this process much smoother.
Related Party Transactions
Dealings between your company and its directors, shareholders, or other connected businesses receive extra scrutiny.
Auditors check such transactions are conducted at fair market value and properly disclosed in your accounts.
Keep detailed records of any related party transactions, including documentation showing how you determined pricing was fair and at arm’s length.
After the Audit: Next Steps
Once your audit is complete, you’ll receive a report outlining any issues found and recommendations for improvement.
Don’t file this away and forget about it – it’s a valuable tool for strengthening your business.
The audit report typically includes:
- The auditor’s opinion on your financial statements (
- Details of any material misstatements found
- Recommendations for improving your financial controls
- Observations about business risks or inefficiencies
Meet with your management team to discuss the findings and create an action plan for addressing any issues. Implementing the auditor’s recommendations promptly not only strengthens your business but also makes future audits easier.
For issues that can’t be fixed immediately, document your plan and timeline for addressing them. Your auditors will check the progress of previous recommendations during the next audit cycle.
Making Audits Work for Your Business
Rather than viewing audits as a necessary evil, forward-thinking businesses use them as opportunities for improvement. An excellent audit can:
- Identify inefficiencies in your financial processes
- Highlight potential tax planning opportunities
- Provide early warning of cash flow or profitability issues
- Give credibility to your financial statements when dealing with banks or investors
- Offer benchmarking against industry standards
The key is maintaining robust financial practices year-round rather than stressing to prepare just before the audit.
Regular reconciliations, consistent documentation, and strong internal controls make audit preparation much less stressful, and will improve outcomes if you need a 5-star report for any reason, e.g. approaching investors.
How Double Point Can Help With Your Audit
At Double Point, our team of chartered accountants brings decades of combined expertise to help businesses navigate the audit process. We work with companies of all sizes to:
- Determine whether you need an audit under the new thresholds
- Prepare your accounts and documentation to audit standards
- Strengthen your internal controls and financial processes
- Address issues identified in previous audits
- Use audit insights to improve your business performance
Whether you’re preparing for your first audit or looking to make your existing audit process more efficient, we’d love to help.
Book a consultation with our team today to discuss how we can support your business through the audit process.
