In accounting terms limited companies often fall into two categories. Firstly, those who are medium or large and are required to have statutory audit. Secondly, small companies who are not required to have an audit but still have to produce statutory accounts which can be prepared by an in house team or an accountant.
However, smaller companies can also benefit from an external review. This does not have to be as formal as an audit and can be in the form of an assurance review.
What is an assurance review?
Assurance reviews can be specifically tailored for the needs and requirements of a company. This type of review from an independent expert provides a strong signal that the company reports are trustworthy.
The independent accountant will enquire with management about factors which may lead to the increased risk of the financial information being misstated, if there are any current issues the business is facing and identifying where increased credibility could add value. The continued conversation with management allows the review to be specifically tailored to individual needs.
Typically the accountant can review;
• Internal controls – This can provide comfort over the design, implementation and operating effectiveness of controls. The review can show how the business can improve efficiency or identify cost savings.
• Non-financial information – This could include enhanced business reviews, corporate responsibility, risk exposures or compliance with regulatory requirements.
• A review of the Statement of Financial Position.
• Specific areas such as stock control or the purchase process.
• Instances of fraud.
After a decision is made on what type of assurance review is required it is important to review the costs and benefits of the various approaches.
At the end of the assurance review the company will receive the final report, the scope of which is determined at the outset.
• Adding value by recommending improvements to the systems and processes in place.
• Reassuring business owners over the procedures in place, in particular, when they are not closely involved in a particular process.
• Enhanced credibility over the information reviewed.
Other options other than assurance reviews
• Unaudited accounts are prepared. An accountant will ensure the accounts are correctly compiled, with no or little assurance given.
• Voluntary audit. A company under the audit threshold can have a statutory audit, providing positive assurance on the accounts.
If there are areas of concern the management have for a company, whether this may be underperformance or simply looking for improvements in processes to allow the company to grow, an assurance review could be a worthwhile process.
For further advice on assurance review please do not hesitate to contact me.