Audits can take many different forms, including financial, compliance, tax and more. Most UK businesses are legally required to have their annual accounts audited by an external firm unless they are exempt.

While a necessary evil to guarantee data quality for clients, financial reporting is complex and can trip up even the most experienced professionals.

If your business fails an audit, the results can significantly damage your company and lead to financial loss, reputational damage and regulatory scrutiny. In short, it’s best to avoid mistakes and failure where you can. Here are the most common financial mistakes and how you can avoid them:

Robust Financial Recordkeeping

Having inadequate financial records and documentation makes audits more challenging and could potentially lead to non-compliance penalties. A lack of supporting documents, records of company procedures and evidence of adhering to accounting policies makes the job more difficult for your accountant and more likely for material misstatements to be made.

Maintaining robust financial recordkeeping is the key to accurate tax determination and will save you a lot of time and money in the long run. You can boost trust in your organisation’s processes by establishing documentation standards that align with the business’s policies. Staff should be provided clear directives on how to document and organise documentation.

Regular Internet Audits

A lack of awareness by employees about their responsibilities and understanding of company financial processes is another common threat to auditing. Regular internal audits are critical for monitoring your business assets and ensuring they are safeguarded from threats. These programs provide objective insight into day-to-day operations and ensure legal compliance.

The internal audit process mainly involves detailed interviews and document analysis aimed at senior management and board management, depending on the size of your business. Many accountant firms provide an auditor who will summarise their findings and recommendations in a report. It is then up to the company to decide whether and how to act on these results.

You’ll receive useful information regarding your business reputation, growth, environmental impact and employee welfare.

Professional External Auditors

Having a professional auditor who has no previous affiliation with an organisation helps to boost the accuracy of account management and increases the likelihood of systematic errors being highlighted. It also boosts your credibility as a business owner as it allows the verification of financial records and statements and commitment to transparency.

This in turn increases an organisation's likelihood of receiving funding for a new project and encourages new investors.

The objectivity and expertise brought to the auditing process improve overall company decision-making and identify business risks before damage is incurred.