Half of SMEs not getting the most from their audit

Undertaken by KPMG, the research has found that around half of small and medium-sized companies are not extracting the value that they could from their audit. Of the 200 small and medium-sized companies surveyed, 56% see their audit as a largely mechanical process that is more or less exactly the same each year, while only 40% of companies agree that the audit brings up recommendations and learning points useful for the business as a whole. Nearly half of companies (47%) only occasionally or never meet with their auditor outside the audit season, despite the fact that nearly two thirds of them (62%) recognise that there is a strong link between the strength of the relationship that they have with their auditor and the value they derive from it. Nevertheless, auditors are viewed as performing a robust job regardless of the status of the relationship: 70% of companies said that their auditor is prepared to challenge them on the way that their financial information is interpreted and presented. “A strong and open relationship between a company and its auditor is vital if the audit is to produce the sort of far-reaching benefits it is capable of producing,” Richard Bennison, head of audit at KPMG, said. “However, our research suggests that companies in the Middle Market fall into two roughly equal camps: those that are getting real value, and those that are not. Companies need to ask themselves which half they are in, and whether they need to take action accordingly.” On average, auditors spend around two weeks on site during the audit, with the accounts being signed off 97 days after the company’s year end. Speed of sign off was viewed as important by over 60% of companies. Bennison concluded: “Finance directors in small and medium-sized companies have a difficult job to do. With limited resources and a remit that often extends far beyond pure finance, different issues compete for attention and time is at a premium. That is why it is so important to maximise the return on any investments. Some companies are clearly maximising the value of the audit to gain insights into the efficiency of the company as a whole; others however are not. Some companies may be surprised how much extra value they can derive from the audit if they establish the right kind of working relationship with their audit firm.”