The value of an audit to SME businesses

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The articles are part of Baker Tilly International’s contribution to the development of an economic policy that promotes good business practices in individual economies around the world.
They spell out the advantages that an audit can offer to the economy and why independent auditing should be supported by regulators, SMEs and anyone with an interest in promoting a strong vibrant economy. While expectations for good corporate governance in capital markets are clearly understood and upheld through strong regulatory supervision, the role of Government in the supervision of SMEs is less clear.

The objective of reducing bureaucracy and “regulatory burden” is well founded when used to remove a “one-size-fits-all” approach to regulation.
However, it is important that certain checks and balances remain in place, so that growing businesses establish good management practices, as they become economically significant.
International Standards on Auditing require close examination of an entity and its environment, including the entity’s control environment and internal control.

Auditors are required to assess how management identifies and mitigates risk as part of the audit risk assessment.
The annual audit for an SME business provides an opportunity for an owner-manager to receive an external “health check” on the reliability of the financial information they use for decision-making purposes, including the way transactions are captured, measured, recorded and evaluated, in comparison to recognised reporting frameworks.

Smaller businesses rarely employ internal experts, the external audit is often a cost-effective trigger for identifying where expert advice might be needed.
Consequently the external audit has an important role as a business grows, and responds to the increasing level of interest from external stakeholders in an entity’s financial position.

A regulatory approach which promotes external audit not only reduces the risk of business failure but also equips smaller businesses with an understanding of how to develop management practices that enable them to grasp opportunities while mitigating risk. These skills are essential for continued growth and prosperity in a vibrant SME market.

Baker Tilly International is the world’s 8th largest accountancy and business advisory network by combined fee income of its independent members.
It is represented by 147 independent firms in 114 countries.

Baker Tilly Gwatidzo is the representative member firm of Baker Tilly International in Zimbabwe.