Group Audit for Holding Company in the UK
A pocket guide from 3E Accounting on the essentials of group audit for holding company in the UK.
Group audits are an area of financial accounting practices that requires juggling multiple components to arrive at a consolidation. It is certainly not for the faint-hearted and is a real challenge that requires cross-border teamwork in most cases. Getting a group audit for holding company in the UK done requires specialist work. Hiring the right firm, such as 3E Accounting associate, will minimise the risk of a bad audit and its far-reaching consequences.
Scrutinising the Group
According to the Companies Act 2006, the end of the financial year requires the directors of a parent company to prepare group accounts. Several exemptions to this requirement can arise, for example, if the company falls under the small companies regime. However, where group audits do need to be prepared, it is always best to engage professional firms.
A group audit is similar to audits in general, except that it is done for the entire group of companies. It involves both group auditors and component auditors. This is where the scope for anomalies and problems arises as it is not easy to coordinate the volume of information at hand. Assessing and scrutinising group financial statements and records is not straightforward as data arrives from multiple components.
In accounting parlance, the term ‘component’ is used to represent both a ‘business entity’ and a ‘business activity’ of an organisation. It is usually synonymous with subsidiaries but can also encompass a product, service, or function. In some instances, it can even be taken to mean a geographical location or investment activity.
Group audits are also an umbrella term that can include a range of audits. A simple group audit encompasses one team working from one location and handling one type of business activity. A complex group audit handles multinational companies in various locations. It will involve several audit teams from different firms handling a variety of activities.
Financial information for each component is separately prepared and consolidated into the overall group financial statement. Component auditors will compile the data and send it over to group auditors. The risk factor that arises here is down to misstatements which can create a ripple effect. Misstatements at the component level will result in a material misstatement at the group level. To mitigate this risk requires skilled and experienced group auditors. They will be able to leverage assessment and audit procedures performed at the component audit stage.
The group engagement team will also need to monitor and control interim financial statements. This requires fine-tuning and precise timing to ensure report dates, events and statements tally. It may require evaluation and inquiry of group management as well as operating budgets.
Group auditors will need to liaise and manage component auditors from various firms. Some of them may actually be in different parts of the world. Such large-scale project management requires early and comprehensive planning and communication. Firms such as 3E Accounting associates have global industry experience that offers innovative and scalable frameworks easily adapted to the job. Contact 3E Accounting today to work with industry professionals in getting your group audit for holding company in the UK do.