The voluntary audit It does not originate from a legal obligation and is usually agreed upon by the governing bodies of the company.
The circumstances that make a company obliged to be audited are of various kinds: turnover, total amount of assets, number of employees, activity sector, having received subsidies or aid from the budgets of the Administrations public or European Union funds, among others.
However, there are many small and medium businesses that, although they do not meet the mandatory requirements to audit their annual accounts, they would like to obtain a audit report with the opinion of an independent professional.
Why does a company carry out an audit even though it is not required to do so?
A voluntary account audit grants guarantee and transparency on the financial information of the company. However, questions like is a voluntary audit profitable? or what is the utility of the auditor? doubts that the management may ask before making a decision on whether to submit its annual accounts to the examination of a external audit.
In an audit, the annual accounts are associated with an economic cost (the fees for the services performed by the auditor) and time (the employee attending the auditor). However, we can assure you that the advantages and benefits of voluntary audit, far outweigh these cost.
What are the benefits associated with conducting a voluntary audit?
- Quality financial information
- Facilitate obtaining financing, grants and subsidies
- Detection of internal control weaknesses and fraud risk
- Detection of possible contingencies of a fiscal nature
- Strengthens the company against the risk of insolvency
- Help in making strategic decisions
- Helps eliminate disputes or controversies between shareholders, owners, administrators and managers of the company
First, providing quality financial information offers greater guarantees and greater transparency to third parties as final recipients of the annual accounts (shareholders, customers, suppliers, banks, future investors, …). This results in a greater company reliability, offering a picture higher seriousness against possible competitors who do not have their accounts audited and thus achieving a competitive advantage.
Also, this guarantee of financial information contributes to facilitating access to the concession of new lines of financing, as well as opting to get possible grants by public bodies.
Another benefit of the voluntary audit is that it allows the detection of weaknesses of internal control, offering improvement proposals, avoiding possible fraud.
From a tax point of view, the audit procedures include the evaluation and analysis of the main taxes of the audited company. This helps to avoid errors in settlements taxes and, consequently, minimizes risk of possible contingencies future of character fiscal.
A recent study by the Bank of Spain, The impact of the Covid-19 crisis on the financial situation of Spanish SMEs February 2021, indicates that “despite the increase in the liquidity ratio of companies before the crisis, their liquidity buffers were insufficient to cover their needs given the magnitude of the disturbance.”
This shows that the prevention is still the most efficient way to mitigate bad debt risks. Financial difficulties, solvency problems or liquidity tensions are recurring risks for SMEs, and the scope of these risks may be even higher, as governments withdraw current support policies for Covid-19 .
A voluntary audit can help the management of many small and medium-sized companies to have financial information with guarantees, which helps them to take strategic business decisions and prevent future risks such as insolvency.
The loss of confidence in the accounting information provided in the annual accounts, on many occasions, generates internal problems between management, shareholders, administrators and management teams. However, if the accounting information is free of errors and audited by an independent third party, it will avoid future conflicts, because it contributes confidence.
Finally, note that in voluntary audits It is not mandatory to attach the corresponding audit report to the annual accounts deposited in the Mercantile Registry, thus preventing it from being made public to third parties.
In times of difficulties and new challenges, the level of demand in the reliability of financial information is much older. Consequently, the need to provide that transparency, in collaboration with the auditors.
It is precisely in the voluntary nature of this type of audit where the usefulness of the activity itself is reached: provide the guarantee of the reliability of the accounting information in front of shareholders, administrators, clients, suppliers, investors or financial entities.
In short, that the shareholders / owners and administrators of the entity decide audit your annual accounts on a voluntary basis, is a statement of intent regarding transparency, clarity and quality of financial information.