What is an Audit?

What is an Audit?

What is an Audit?

An audit is an investigation conducted by an independent party into a company’s financial report. The aim of an audit is to provide assurance (different from a guarantee) that the financial statements are true and fair according to the relevant financial reporting framework. There are typically three types including Financial Audit, Compliance Audit, and an Operational Audit.

 

Financial Audit

This is typically the most common type of audit. A financial audit is an evaluation of a company’s financial accounts. This is designed to provide assurance that the accounts have been prepared properly and whether they show a fair representation of the organisation’s financial position. This is normally completed by an external independent, audit firm.

 

Compliance Audit

A compliance audit is a detailed review of whether your business or organisation is complying with specific regulatory guidelines.

 

Operational Audit

This is a review of how your organisation conducts its business. The aim of this type of audit is how to improve your organisation’s efficiency and effectiveness.

 

Is it compulsory to have an audit?

All companies above a certain size are required by the Compliance Act to have a financial audit (known as a statutory audit). However, the following companies must have an audit, irrespective of size:

  • A public company (unless it’s dormant)
  • A subsidiary company (within a group which is not small)
  • An authorised insurance company or carrying out insurance market activity
  • Involved in banking or issuing e-money
  • A Markets in Financial Instruments Directive (MiFID) investment firm or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
  • A corporate body and its shares have been traded on a regulated market in a European state.

 

For periods commencing on or after 1 January 2016 your company is exempt from an audit if you meet two of the following:

 

  • Annual turnover of no more than £10.2 million
  • Gross assets of no more than £5.1 million
  • 50 or fewer employees on average

 

 

(Source: https://www.gov.uk/audit-exemptions-for-private-limited-companies )

What is the purpose of a financial audit? 

The purpose of an audit is for a qualified independent party to examine your financial reports. This an objective evaluation by a professional who will determine if the financial report has been presented fairly according to the accounting framework. In some cases, a clean, unqualified report can enhance your businesses credibility with lenders, creditors, and investors.

 

The audit process

Every audit is unique but the following is a list of some typical steps that are often taken:

 

  • The company or organisation prepares its financial report in accordance with the appropriate legal and financial requirements.
  • The auditor will gain an overview and understanding of the company and consider any external factors that could have impacted the business in the reporting period.
  • The auditors will look at the financial information and identify, consider, and assess any risks. They will also investigate the infrastructure of the company to see what protocols they have in place to mitigate those risks.
  • Once risks have been identified the auditor will examine the financial report considering these risks to ensure the report is accurate.
  • The auditor will use their knowledge of your business and the areas of risk to direct their approach.
  • The audit will perform tests of the financial information supporting the financial report and issue an opinion as to where the financial report is accurate.

 

What are the advantages of an audit?

 

  • Provides reassurance to directors and shareholders and after stakeholders that financial statements are materially correct.
  • Identifies weaknesses with the accounting process and recommend ways to improve.
  • Auditors will make you aware if there are any changes in accounting standards and tax legislation to make sure you are prepared ahead of time for this.
  • For some lenders, an audit can often be a requirement. An audit can sometimes improve your chances of being accepted for a loan application.
  • An audit provides reassurance to customers and suppliers that your finances are in order.

 

How can we help

An audit can provide your business with numerous benefits. If you are considering having an audit please do get in touch for a free initial meeting. Hawsons have offices in Sheffield, Doncaster, and Northampton.  We have an established reputation for integrity and professional competence of which we are proud and committed to maintain. Our team of audit experts is fully trained on the latest developments in Auditing Standards which is becoming an increasingly specialised area.

 

 

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141
COVID-19 sends rail off the rails

COVID-19 sends rail off the rails

COVID-19 sends rail off the rails

The Covid-19 pandemic has had far-reaching implications for many business sectors and on our way of life generally. Its impact on the rail industry has been particularly acute in the short-term, and although the long-term ramifications have yet to emerge with any certainty, these may well be significant on both a strategic and operational level. This is likely to be the case for train operators and consequently for those in the supply chain for the industry.

 

Passenger Trains

Annual passenger numbers had risen consistently since privatisation to 1.7 billion journeys, but these collapsed by 95% during the early months of lockdown. As a result, the Emergency Measures Agreement had to be implemented at the staggering cost of £900m per month to effectively re-nationalise the passenger network.

 

As things stand the Emergency Measures Agreements are due to be replaced in September and a revised model for Train Operators contracts will need to be in place by then. Given the timescale, it is likely that these will need to be extended.

 

But what will the railways look like in a post COVID world, or worse, a COVID interlude world?

 

Health concerns and social distancing measures have caused a drop in passenger numbers in the short-term, and led to a restriction on the capacity available on trains. Add to this the realisation by a newly born “zoomteams” generation that the new normal needn’t involve a daily commute to the office and suddenly the economics of running passenger trains in the future looks different. The relative certainty of EMA’s should help the Train Operating Companies, but the ongoing cost to the taxpayer means that this cannot continue indefinitely.  Either the Train Operating Companies will have to adapt their operations, or a more fundamental change in the industry may be required.

 

In the world of open access operations, where EMA funding is not available, only one of the East Coast Main Line operators is currently looking to restart its services which highlight the challenge of being able to operate profitably at this time.

 

Freight Sector

In the freight sector, loadings were reported to be down around 30% during lockdown, but these have recovered to around 85% of normal activity recently. The biggest drops were due to a fall in construction activity and a reduction in the volume of imported intermodal traffic. Interestingly whilst the volume of traffic dropped by around a third, it was conveyed on around 50-60% of the trains – the fall in passenger traffic allowed longer trains to be run on lines where freight paths are normally at a premium.

 

On the infrastructure front, the reduction in the number of trains moving has allowed projects to be undertaken. Looking forward, this area would seem ripe for providing the “shovel ready” projects that the government seems keen to espouse, but it is a concern that Rishi Sunak did not mention any rail projects in his recent summer statement. In addition, reports emerged in late June that further revisions to the HS2 project were being considered that may involve the dropping of the eastern arm serving the East Midlands and South Yorkshire in favour of a Trans-Pennine route from Manchester to Leeds via Bradford.

 

Overall the picture remains very uncertain for a key component in the nation’s economy.

 

 

 

 

More from our transport and logistics experts

You can find all of our latest transport and logistics sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Paul Wormald, Partner

Paul Wormald

Partner, Doncaster

01302 367 262
How has COVID-19 affected the haulage industry?

How has COVID-19 affected the haulage industry?

How has COVID-19 affected the haulage industry?

In this article, we will be covering how COVID-19 has affected the haulage industry. The data we will be using in this article is from a series of surveys undertook by the Road Haulage Association (RHA) in April 2020. In this survey, the RHA surveyed 4,500 firms in the haulage industry and the survey results can be found here.

 

How many trucks are inactive?

 

In the first survey, the RHA asked respondents how many trucks they had inactive. The RHA categorised these results by sector. The sectors where there were the most trucks inactive include, removals (96% inactive), car transporting (89% inactive), and, somewhat surprisingly, medical (75% inactive). Whilst these were the worst affected haulage sectors in the UK, initially, a total of seven haulage sectors have seen over 50% of their trucks become inactive due to COVID-19. This was believed to be due to health and safety reasons, or a lack of demand for products in these sectors. The least affected sectors include agriculture & fishing (22% inactive), food (32% inactive), waste management (33% inactive).

 

Across the whole industry, 25% of drivers were furloughed, and 46% of trucks were inactive during the early part of lockdown.

 

Cash Flow

 

With such disruption to activity, it was inevitable that the finances of many haulage firms would suffer a negative impact. 15% of haulage operators surveyed had applied for the Coronavirus Business Interruption Loans Scheme (CBILS), but 95% had their applications rejected. This left many haulage operators struggling to survive with only 8% seeing their cash flow as normal. 73% have seen their cash flow significantly reduced, 23% reduced to an unsustainable level, and 13% of firms have said that they are using their overdraft. 56% of operators were intending to or have accessed funds from the coronavirus job retention scheme.

 

If you would like any advice on how to effectively manage your cash flow, please read our cash flow article here.

 

Work Volume

 

In the survey, the RHA also asked hauliers how their volume of work had been affected. Only 5% reported their work volume was normal, and 22% of hauliers had zero work. A massive 83% reported that volume had significantly reduced or worse

 

88% of haulage businesses reported that backloads had significantly reduced or worse which was a further hit to operating efficiency.

 

 

Conclusion  

 

To conclude, the haulage sector has been hugely affected by the coronavirus pandemic. A very small amount of firms reported that it was business as usual. 5% reported a normal work volume, and 8% reporting a normal cash flow. The survey responses suggest many haulage firms have seen a drop in demand due to COVID-19. Very few respondents saw very little hope for the long term future.

 

Paul Wormald transport partner at Hawsons commented: “This is a very illuminating piece of research carried out by the RHA and it illustrates the way a key industry for the whole economy operates on a knife-edge. With only 12% of respondents saying that could survive in the long term at the volumes of work seen earlier in the summer, it is clear that the sector has faced some major challenges. Although activity may have increased since April, the economic future remains uncertain, and with furlough schemes set to end in the autumn, and paydays beginning to fall due for self-assessment, VAT, and various government-backed loan schemes during the first part of 2021, it is imperative that haulage firms plan their cash flow through what is sure to be an equally challenging period of time.

 

How we can help?

 

Please visit our COVID-19 support hub page for a summary of government support. We would also recommend using the Coronavirus Business Support Finder here.

 

At Hawsons we have a dedicated team of Transport & Logistics accountants at our offices in Sheffield, Doncaster, and Northampton. With our experience in the transport and logistics sector we are able to develop a close understanding of your business and, through active year round involvement, we can help you anticipate and deal with challenges quickly and effectively.

 

 

More from our transport and logistics experts

You can find all of our latest transport and logistics sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Paul Wormald, Partner

Paul Wormald

Partner, Doncaster

01302 367 262
NHS England announce abatement figure for dental practices

NHS England announce abatement figure for dental practices

NHS England announce abatement figure for dental practices

 

NHS England and the Chief Dental Officer England have published a letter setting out key NHS contractual issues caused by the coronavirus pandemic. This letter dates back to 1 April 2020.

 

This was something that was heavily discussed between the British Dental Association (BDA) and NHS England before the letter was published. The letter confirms that an abatement will be applied to the majority of contracts from 1 April until 8 June this will be 16.75%. This means there will be a 16.75% reduction in to the total contract value of consumable and other variable costs incurred by practices. This figure was calculated from costs that would have not incurred whilst practices were closed. (for example, materials and laboratory costs). Practices that have continued to operate and provide urgent care through this period, will receive no abatement for the period of time that they were providing urgent care.

 

For practices that operated after 8 June there will be no abatement and 100% of the contract value will be paid. NHS England and the BDA recognise that providing care during the coronavirus pandemic will cost more to purchase PPE, hand sanitiser, and implementing social distancing measures.

 

The letter states that practices will need to provide at least 20% of normal volumes of patient care activity to receive their full contract value. However, it is important to note that the BDA and NHS England have agreed that the definition of patient care activity includes all clinical contact, face to face, telephone or video consultation.

 

However, from 20 July 2020 NHS England and the BDA expect all practices to be ready to provide face to face interventions. They do appreciate that capacity will be reduced and it might not be possible to high levels of dental activity. But they do expect it to be possible.

 

If you would like to read the full letter you can access this here.

 

How can we help

 

At Hawsons we have a dedicated team of Dental accountants at our offices in Sheffield, Doncaster, and Northampton. Our friendly team offer a unique client focused service to ensure all your accountancy and taxation requirements are dealt with as smoothly and efficiently as possible.

Free initial meeting

Scott Sanderson

Partner, Sheffield

0114 266 7141
Additional Funding Available for Pharmacies

Additional Funding Available for Pharmacies

Community pharmacies that meet certain requirements will be entitled to claim additional funding of £1,630 per contractor through the Pharmacy Quality Scheme. There are 14 requirements that pharmacies will need to meet to be eligible the Pharmaceutical Services Negotiating Committee (PSNC) announced on 13 July. The 14 requirements are based around ensuring that pharmacies have specific measures in place in order to respond to the COVID-19 pandemic. These measures include arranging and ensuring social distancing is maintained on your premise. Pharmacies must also display the latest COVID-19 posters and information.

 

See all requirements here

 

How do I claim?

 

Community pharmacy contractors will be able to claim via the NHS Business Services Authorities Manage Your Services portal from 14 July 2020 until 29 January 2021.

 

This is only the first part of the scheme, with total funding of £18.75m announced for the scheme. The PSNC has said any remaining funding will be used in part two of the 2020/21 scheme, further details are yet to be announced.

 

How can we help?

 

At Hawsons our dedicated team of pharmacy accountants offer a specialist service to community pharmacists and locum pharmacists. We can assist you with accountancy and taxation needs, utilising our in-depth knowledge and experience in the sector.

 

Free initial meeting

Scott Sanderson

Partner, Sheffield

0114 266 7141