If your company has just crossed an audit threshold, or a lender or investor has asked for audited accounts for the first time, the process can feel opaque. It is not. A statutory audit follows a well-defined sequence, and knowing that sequence is most of what you need to get through the first one without losing weeks.
Before anything: the appointment and the opening balances
The thing nobody warns you about is opening balances. Your auditor has to be satisfied about the position at the start of the year as well as the end of it, because the closing balance sheet depends on it. In a first audit there is no prior year audited file to lean on, so this work has to be done from scratch.
Practically this means the auditor will test a selection of your opening balances, review how the prior year figures were prepared, and sometimes ask questions about transactions that happened before they were appointed. It is not scepticism about your previous accountant. It is a requirement.
If you know an audit is coming, appointing the auditor early enough that they can look at opening balances before the year end closes saves real time.
Planning: the part that determines everything else
Good audits are decided at the planning stage. Ours starts with a pre-planning conversation about your business rather than your numbers: what you sell, how you get paid, where the judgement calls sit, what changed this year, what worries you.
From that the auditor sets materiality, identifies the risk areas that will get most attention, agrees a timetable, and issues the PBC list. Materiality matters more than most clients realise. It determines what gets tested and what does not, and it is why an auditor may spend a day on one balance and five minutes on another that looks similar in size to you.
Push for a planning meeting with the person who will actually run the audit, not just the partner. If your auditor is content to skip planning and turn up for fieldwork, that is a signal.
Fieldwork: where time gets lost
Fieldwork is testing. Samples get selected, documents get requested, balances get confirmed with third parties, and the auditor works through the risk areas identified in planning.
Almost all delay at this stage comes from one of three things.
Incomplete information. A PBC list returned 80% complete does not mean the audit is 80% ready. Auditors work in blocks, and a missing bank confirmation or contract can stall an entire area.
One person holding everything. If every question routes through your finance director and they are on holiday for a fortnight, the audit stops. Name a second point of contact who can find documents.
Answers that arrive slowly. A query that takes four days to answer costs more than four days, because the auditor has moved on and has to pick the thread back up.
The clients who find audits painless are not the ones with the simplest businesses. They are the ones who answer quickly.
Completion: the conversations that matter
At completion the auditor reviews the financial statements, forms the opinion, and raises anything that needs discussion. Expect three sorts of conversation.
Adjustments. Errors found during testing that need correcting. Some you will agree with immediately. Some are judgement calls, and you are entitled to push back with reasoning.
Unadjusted differences. Items that are wrong but not material enough to require correction. These get listed and you will be asked to confirm you are content not to fix them.
Control observations. Weaknesses noticed during the audit, delivered as a management letter. In a first audit this is often the most valuable document you receive, because nobody independent has looked at your controls before.
Sign-off, and what it means
The audit report is signed, the accounts are approved by the directors, and the filing deadline is met. The opinion itself is short. Unmodified means the financial statements present fairly. That is the outcome you want and, for most well-run businesses, the outcome you get.
A modified opinion is not a disaster but it is a signal that lenders and investors read carefully, and it is worth understanding early whether anything in your position could lead to one.
What to do differently the second time
The second audit is materially easier, because the opening balances are settled and the auditor knows your business. You can make it easier still by keeping a running audit file through the year: reconciliations done monthly rather than reconstructed in March, contracts filed where someone else can find them, and a note of the judgements you made and why while you still remember.
Most of the cost of an audit is time. Most of the time is spent finding things. Anything you do that makes things easier to find comes back to you in fee.