As we said last week, the UK Financial Reporting Council published, in May 2025, some brief guidance, as part of a campaign to support SME Auditors which explains What is an Audit?
The main topics dealt with in the guide include:
- What is an audit?
- What do we mean by ‘materiality’?
- What is the purpose of an audit?
- What value does an audit bring to the audited entity?
- What are the principles common to all audits?
This week we will look at the topic ‘What value does an audit bring to the audited entity?’
It explains that the primary benefits of an audit, from the audited entity’s perspective, stem from the enhanced trust and confidence that can be provided to users of the financial statements.
Many
- Banks
- Lenders and
- Investors
find audited financial statements will signify that the robust business practices operated by businesses that are subject to audit help give such stakeholders as these, additional confidence and may help inform their decisions to allocate capital.
An audit may also result in
- lower risk premiums on investments;
- be a precondition as part of a loan agreement; or
- be a requirement as part of a contractual arrangement.
In each of these cases, the audit provides accountability and transparency for the users of financial statements. In addition, an auditor can provide an informed perspective on the controls and processes, which can in turn support management in enhancing them.
The guide emphasises that the auditor must abide by ethical and independence standards. While the auditor may provide an opinion and feedback on judgements made by management, it is not their role to play a part in management decision taking.
This guide is well worth reading and passing on to your clients to help better explain the valuable service that auditors provide. See What is an Audit? for more details.
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
- Our latest CPD Webinar on The Main Changes in Irish GAAP (recorded July 2024)
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
