Statutory audits play a crucial role in ensuring transparency, accuracy, and legal compliance for businesses of a certain size or structure in the UK. Whether your organisation is privately owned, publicly listed, or part of a regulated sector, the statutory audit process exists to provide independent assurance that your financial statements are a true and fair reflection of your operations. For company directors, stakeholders, and investors, a statutory audit helps build confidence, highlight risks, and improve financial controls.
At Millet Accountants, we carry out statutory audits for clients across London and the wider UK, tailoring our approach to suit the size, sector, and structure of each business. For example, we regularly assist businesses undergoing statutory audits in Barnet, where we act as both trusted advisors and independent examiners. Our goal is to make the audit process as clear, efficient, and valuable as possible. In this blog, we explain the steps involved in conducting a statutory audit and what businesses should expect at each stage.
Understanding the Legal Requirement for Statutory Audits
In the UK, not all companies are required to have a statutory audit. However, once a business exceeds two of the following three thresholds, an audit becomes mandatory: an annual turnover of more than £10.2 million, a balance sheet total exceeding £5.1 million, or an average of more than 50 employees. Companies that are part of a group or operate in regulated industries such as financial services may also require an audit, regardless of size.
The primary purpose of a statutory audit is to provide independent verification that a company’s annual accounts are free from material misstatement, whether due to fraud or error. This process helps satisfy shareholders, regulators, and lenders that the business is being properly run and that financial reporting is reliable.
Even where an audit is not legally required, some businesses still choose to have one voluntarily. This is often to satisfy the demands of lenders, attract investment, or demonstrate strong governance. At Millet Accountants, we also assist with voluntary audits where appropriate.
Planning the Audit
The first stage of any statutory audit is planning. This is where we take time to understand the business, its systems, risks, and financial structure. Effective planning helps us tailor our audit procedures to focus on the areas that matter most and ensures the audit is carried out as efficiently as possible.
We begin by meeting with the company’s finance team and directors to discuss the scope of the audit, agree timelines, and identify any issues or complexities that may affect the process. We will review previous financial statements, assess the accounting policies in use, and consider any changes in regulation or company activity since the last audit.
A risk assessment is conducted to determine which parts of the business are most likely to contain material misstatements. This could include areas such as revenue recognition, stock valuation, or large transactions. Based on this, we develop a bespoke audit strategy, documenting the specific procedures we will follow.
At this point, we also request access to the necessary records and systems. Clear communication during this stage sets the tone for the audit and helps avoid delays later on. Businesses that are well-prepared at this point often find the audit process far less disruptive.
Fieldwork and Testing
Once planning is complete, we move into the fieldwork stage. This is where our audit team carries out the agreed testing procedures. We usually work either at the company’s premises or remotely, depending on the nature of the business and the availability of digital systems.
During fieldwork, our auditors gather evidence to confirm that the financial statements are accurate. We test samples of transactions, examine supporting documents, confirm balances with third parties where necessary, and check that accounting treatments comply with relevant standards.
For example, we may review a sample of sales invoices to ensure that revenue is recorded correctly, or we might verify stock levels against inventory records to check for discrepancies. We may also examine payroll data, supplier payments, bank reconciliations, and loan agreements.
Our aim is to build a picture of how well the financial systems are operating and whether the figures presented in the accounts are reliable. Throughout this stage, we keep the finance team informed of our progress and discuss any issues as they arise.
We understand that audits can sometimes feel intrusive, especially for smaller companies, which is why we work professionally, respectfully, and with minimal disruption. At Millet Accountants, we pride ourselves on conducting thorough audits without getting in the way of day-to-day operations.
Addressing Errors and Making Adjustments
A crucial part of the audit process involves addressing any errors or inconsistencies that are found during fieldwork. If we discover transactions that have been recorded incorrectly, misclassified items, or unusual balances, we will discuss them with management and request supporting evidence.
In many cases, these issues can be resolved quickly through clarification or adjustments to the accounts. If adjustments are needed, we work with the finance team to ensure they are made correctly and documented properly. We also check that any changes are consistent with accounting principles and legal requirements.
Occasionally, the audit may highlight more significant concerns, such as weaknesses in financial controls, compliance breaches, or issues around going concern. Where this happens, we provide clear advice on how to address the problem and what steps should be taken.
At all times, we maintain our independence as auditors. It is our duty to report honestly and objectively, but we also see our role as helping businesses improve. Feedback from an audit can be a valuable tool for strengthening internal processes, managing risk, and improving governance.
Completing the Audit and Issuing the Report
Once fieldwork is complete and any issues have been addressed, we finalise the audit. This includes performing final checks, reviewing disclosures in the financial statements, and ensuring that all audit evidence has been properly documented.
The final output is our audit report, which is included with the company’s financial statements. This report states whether the accounts give a true and fair view of the company’s financial position and whether they have been prepared in accordance with applicable accounting standards and the Companies Act.
If we are satisfied that the accounts are accurate and no material issues exist, we issue an unqualified audit opinion. If there are concerns that have not been resolved, we may issue a modified opinion and explain the reasons in the report.
We always review our findings with the company directors before issuing the report and provide a summary of any key points arising from the audit. In many cases, we also produce a management letter outlining any suggestions for improving systems and controls.
At Millet Accountants, we view the audit report as more than just a compliance requirement. It is a reflection of your business’s credibility and financial health. We ensure it is completed to the highest standards and filed promptly with Companies House, if applicable.
The Benefits of a Well-Conducted Statutory Audit
While some companies view audits as a necessary burden, there are many benefits to having a well-conducted statutory audit. First and foremost, it provides assurance to shareholders and stakeholders that the business is financially sound and being run properly.
An audit can also identify areas where systems and processes could be improved, reducing the risk of fraud or error in future. It can help detect misstatements, uncover inefficiencies, and provide independent confirmation of balances and valuations.
For businesses seeking funding, investment, or partnerships, audited accounts offer credibility and can support negotiations. They are often required by lenders and investors, particularly in competitive sectors like property, tech, and healthcare.
In locations like Barnet, where businesses range from fast-growing SMEs to established firms with complex structures, statutory audits play an important role in ensuring financial transparency and strategic readiness. As experienced auditors, we’ve seen first-hand how valuable an audit can be in supporting long-term growth.
Millet Accountants takes a practical and professional approach to auditing. We believe that a good audit is one that adds value, supports good governance, and helps you feel confident in your numbers.
Working with Millet Accountants
Conducting a statutory audit requires technical expertise, sector knowledge, and a clear understanding of the UK’s regulatory framework. At Millet Accountants, we combine all of these qualities to deliver a service that is efficient, transparent, and tailored to your business.
Our audit team works with businesses across London and beyond, including those undergoing statutory audits in Barnet. We build long-term relationships with our clients, ensuring that each audit runs more smoothly than the last. We provide clear communication throughout, explain our findings in plain English, and offer practical advice on improving systems and staying compliant.
Whether you are preparing for your first statutory audit or are seeking a new partner to handle your regular audits, we are here to help. Our focus is on making the process as straightforward as possible while delivering the high standards that regulators, investors, and stakeholders expect.
If you’d like to discuss your statutory audit requirements or have any questions about what to expect, contact Millet Accountants today. We’re ready to support you at every stage of the audit process.