Not so long ago, all companies had to be audited, irrespective of the size or ownership type. That changed when the new Companies Act of 2008 came into effect. Undoubtedly, a lot of business owners have let out a huge sigh of relief as they could now avoid a large cost and yearly nuisance.

However, many business owners still opt for a voluntary audit. We often get the questions: “Why would anybody put themselves through an audit if it’s not necessary.” Turns out that there are many good reasons why business owners might prefer to fork out the extra money for an audit, even though it’s not required.

Let’s have a look at what those reasons are:

You’ve worked hard to build your business up to something that you’re proud of. But, as retirement is nearing, you’re thinking of selling the business. You obviously want to get the best price possible for your baby.

Audited financial statements will illustrate to prospective buyers that you’ve taken your business seriously, and that they can rely on the figures in your company financials. A buyer would want to know that profits and assets are not inflated – thereby increasing your asking price unjustifiably and that they’re buying a profitable business.

Looking to expand? Congratulations! If you’re approaching investors to provide funding for your business, audited financial statements can help you to secure an investment. Some investors may expect to see audited statements, but even if they don’t, it will provide them with an extra layer of assurance that their money is in good hands.

Additionally, audited financial statements will help valuers to calculate a value for your company more accurately, which is extremely important – you don’t want to sell too many shares for too little funding.

A voluntary audit will keep your management team accountable and reduce the risk of mismanagement. If you’re not working in the business on a regular basis, or if you have other staff members who manage functions like your accounting, independent involvement from auditors can give you an extra layer of assurance that your company is performing well.

An audit is a good deterrent against fraud. When people know that an auditor will delve into the books at year-end, they’re less likely to attempt a fraudulent act. An audit can also highlight any fraud risk areas, like poor internal controls or if there aren’t proper segregation of duties, for instance, if the person handling the cash is also in charge of accounting for cash transactions in the books.

Just keep in mind that a regular audit does not guarantee that fraud will be found. If you suspect fraud, you may want to request a forensic audit.

Between 70% and 80% of small businesses in South Africa fail within the first three years. One of the reasons for failure is that business owners don’t have advisors that they can turn to to help them navigate the complex world of business.

Business owners don’t come out of the womb knowing every aspect of running a business. We all need advisors and independent eyes on our businesses and finances to help us avoid major mistakes, point out where we can make improvements, and help us make good business decisions so that we can be successful.

Misstatements and poor internal controls can cost you a lot in the long run. Your auditors can identify these issues and suggest improvements, fix major misstatements, and help you to achieve better results for your business.

Audited financial statements can boost your credit rating and provide assurance to lenders that you’ll be able to pay them back. This means that your chances increase to secure an overdraft, loan, or credit card from the bank. Additionally, your interest rates may be lower as your company will be perceived as less of a risk by financiers.

Suppliers may also be more likely to extend credit terms to you if you can provide them with audited financial statements.

Audited financial statements can improve your chances of winning a tender for a project with the government or another entity. If you’re taking your financials and accounting serious, you’re more likely to take their project serious as well.

If you know that you may need to be audited in the near future, you can just as well start to get your financials audited sooner. If your financial statements haven’t been audited previously, your opening balances will have to be verified. This means additional costs and time needed to verify those figures, which may hold you back at a critical time. A voluntary audit can also help you to get your financial processes in shape before you meet the requirements of a statutory audit.

In case you’re not sure whether you’re nearing the audit threshold, have a look at this blog post.

If you’re part of a larger group of companies, you may be required to be audited, especially if part of an international group or if a company who holds shares in your company is listed. Franchisors may also expect their franchisees to be audited.

If you’ve read this far, you’re probably considering opting for a voluntary audit. But you may still have a bunch of questions, which is to be expected. Get in touch with us so that we can help you to make the right decision for your company and circumstances.