When it comes to managing a business, audits are often viewed as an obligation imposed by law. However, there’s another option: the voluntary audit. This isn’t something businesses are legally required to do, but it can provide significant benefits. Let’s explore what a voluntary audit is, why it might be useful for your company, and whether it’s the right decision for your business.
What is a voluntary audit?
A voluntary audit is an independent review of your financial statements undertaken by an external auditor but without the legal requirement to do so. The business chooses this process to ensure that the financial statements accurately reflect the company’s financial position.
While some companies are required by law to conduct statutory audits — based on criteria like turnover, balance sheet total, and the number of employees — a voluntary audit is exactly what it sounds like an audit you opt into.
So, why would a company choose to have an audit when it’s not strictly necessary?
How does a voluntary audit differ from a statutory audit?
The primary difference between a statutory and voluntary audit is the obligation. Statutory audits are mandated by law for businesses that meet certain thresholds, while voluntary audits are chosen by the business regardless of whether they meet these criteria.
One of the key advantages of a voluntary audit is the flexibility it offers. You can decide when to conduct the audit rather than being bound by statutory deadlines. Additionally, while statutory audits must cover all areas dictated by law, a voluntary audit can focus on specific financial aspects or issues that matter most to you.
Another difference is privacy. The results of a statutory audit must be submitted to Companies House, making them available to the public. With a voluntary audit, the decision to share the results is yours.
What are the rules around statutory audits?
Before we explore the benefits of voluntary audits, it’s helpful to understand when audits are legally required. For the 2024/25 tax year, a statutory audit is mandatory for UK companies that meet two or more of the following conditions:
- Annual turnover of £10.2 million or more
- Balance sheet total of £5.1 million or more
- 50 employees or more
Certain industries, like financial services or companies that are subsidiaries of larger groups, may also require statutory audits. Proposed changes to these thresholds, under review in 2024, could potentially mean that fewer businesses will be required to undergo a mandatory audit. However, until these changes are confirmed, the current rules remain in place.
Why might your business need a voluntary audit?
Building trust with stakeholders
One of the biggest advantages of a voluntary audit is the confidence it builds with stakeholders. Investors, lenders, and even large customers or suppliers may view audited accounts as a sign of financial reliability. For businesses seeking investment or loans, audited financials can help secure better terms and instil confidence.
By choosing to undergo an audit voluntarily, you show that your business values transparency and has nothing to hide regarding financial reporting. This can give investors or lenders a reason to trust your business.
Improving financial accuracy
Even the most diligent finance teams can miss things. A voluntary audit brings an independent, fresh perspective to your financial records, potentially spotting errors or inefficiencies that internal teams might overlook. Whether it’s an error in reporting or an inefficiency in your accounting processes, a voluntary audit can help fine-tune your financial management.
An auditor may also identify tax savings opportunities, flagging deductions or allowances that might otherwise be missed.
Preparing for growth
As your business expands, you might approach the thresholds for mandatory audits. Having voluntary audits early on can help prepare your business for this transition by ensuring that your financial systems are already in good shape. This also helps build a relationship with an audit firm, making the process smoother when audits become a legal necessity.
Additionally, if you’re looking to attract investors or plan for significant growth, having audited financial statements could be key to positioning your business as a reliable investment.
Peace of mind for owners and directors
For business owners and directors, a voluntary audit provides reassurance that the company’s financial position is accurate. It’s not just about ticking boxes for external stakeholders — it can also give you the peace of mind that comes with knowing your finances have been thoroughly reviewed and validated.
Is a voluntary audit right for your business?
Deciding whether to opt for a voluntary audit involves weighing up the benefits against the costs. The key is understanding your specific business needs.
A voluntary audit can provide real value if your company is seeking investment, dealing with complex financial transactions, or preparing for rapid growth. On the other hand, if your business is stable and has no immediate need to improve financial transparency or prepare for external scrutiny, it may not be necessary right now.
In any case, voluntary audits offer flexibility. You’re not locked into a strict legal requirement, and you can opt for one when it suits your business strategy.
Making an informed choice
Ultimately, the decision to pursue a voluntary audit depends on your company’s goals. A voluntary audit can strengthen your financial reporting, give you a competitive edge, and build stakeholder trust. If you’re unsure whether it’s the right move, talking to an auditor or accounting advisor can help clarify whether this process would benefit your business.
Ever asked, what is a voluntary audit? Then get in touch today to discuss all your audit requirements.