If you are undertaking your first statutory audit it can feel daunting and it is easy to make errors that may potentially affect the outcomes in the final audit report.

If your business has grown quickly, there’s a good chance nobody has ever asked to see your records in this level of detail before and that can catch finance teams off guard.

The good news is that most of the stress around a first audit comes down to preparation rather than the audit itself.

Businesses that plan ahead and undertake the right work tend to find the process far more straightforward than they expected.

To help you, our experienced audit team at ML Audit has put together this guide covering what to expect, what to prepare and how to approach your first company audit with confidence.

When might your company need its first audit?

Companies typically become subject to statutory audit once they grow past the audit exemption thresholds.

If you company’s turnover, team or assets have grown by 50 per cent or more in the last year, it is worth reviewing whether your current audit exemption still stands.

Statutory audit thresholds in 2026

To qualify for a UK audit exemption as a small company, you must meet at least two of the following three criteria for financial years starting on or after 6 April 2025:

  • Annual turnover – No more than £15 million
  • Gross assets – No more than £7.5 million
  • Employees – 50 or fewer on average

When is an audit required outside of the statutory threshold?

Exceeding these thresholds are the most common reason for requiring an audit but there are other reasons an audit might be required sooner. These include:

  • Shareholder, lender or investor requirements written into funding or governance agreements
  • Group structures, where audit obligations can apply even if an individual company would otherwise qualify for exemption
  • Sector-specific requirements that apply regardless of size, such as charity audits

If you’re unsure whether your business needs an audit, our audit and assurance services team can help you work out where you stand.

The challenges of your business’s first audit

A first audit is rarely difficult because of the audit itself. It’s usually difficult because records, processes and controls haven’t yet caught up with the size and complexity of the business.

Common first audit pain points

Here are a few of the pain points we typically see during a first audit:

  • Incomplete reconciliations that have built up over several months
  • Supporting evidence scattered across inboxes, spreadsheets and filing systems rather than kept centrally
  • Revenue recognition that hasn’t been clearly documented or consistently applied
  • Stock records that don’t reflect actual quantities or valuations
  • Fixed asset registers that haven’t been updated as the business has grown
  • Approval processes that exist informally rather than being documented
  • Finance teams working to tight deadlines with limited capacity to gather everything an auditor will ask for
  • Records that were fine for day-to-day management but don’t hold up to the level of scrutiny an audit requires

None of this usually means your business has done anything wrong, but it simply means the systems that worked well for a smaller company now need to catch up with where the business is today.

What to prepare before your first audit

Getting ahead of the process makes a real difference. Before your first audit begins, you should pull together:

  • Management accounts for the period under review
  • Draft year-end accounts
  • Bank reconciliations for all accounts
  • Debtor and creditor reports
  • VAT and payroll records
  • Loan agreements and details of any financing arrangements
  • Contracts and leases relevant to the business
  • Stock records, including valuation methodology
  • An up-to-date fixed asset register
  • Board minutes covering key decisions made during the period

Having these ready before fieldwork starts will significantly reduce the amount of back-and-forth once the audit is underway.

How to make the audit process smoother

Preparation isn’t only about paperwork. A few practical steps can make the whole process easier for everyone involved:

  • Speak to your auditor early, rather than waiting until the deadline is close
  • Agree deadlines and responsibilities upfront, so everyone knows what’s expected and by when
  • Understand what evidence will be needed for key balances and transactions
  • Allocate clear internal ownership for gathering information, rather than leaving it to chance
  • Resolve any known issues before fieldwork begins, so they don’t become a surprise midway through
  • Keep communication open and clear throughout, particularly if something changes or takes longer than expected

Your first audit will always be a new process, but taking the right steps from the start can help make the process less frustrating.

Common first audit mistakes to avoid

A few mistakes tend to come up again and again with first-time audits. Watch out for:

  • Waiting until the deadline is close before starting preparation
  • Assuming that preparing accounts is the same as being audit ready
  • Leaving reconciliations unresolved and hoping they won’t be picked up
  • Failing to document key judgements made during the year
  • Underestimating how much scrutiny stock, revenue or group reporting issues can attract
  • Choosing an auditor too late, which limits planning time, can add pressure to an already tight process and increase costs

If you have concerns about any of these issues it is important to flag them with your auditor, so that the points can be addressed before the audit commences.

When should you speak to an auditor?

As soon as a statutory audit looks likely, it’s worth having a conversation with an auditor. This is particularly important if your business is growing quickly, taking on new funding, adding shareholders or becoming more complex in its structure.

Starting the conversation early gives everyone time to plan properly, agree a realistic timeline and address any gaps in records or processes before they become a problem.

If your business is approaching its first statutory audit, it is time to have a conversation with our auditors to discuss your requirements, deadlines and next steps.

 

Frequently asked questions about first statutory audit

What is a first statutory audit?

A first statutory audit is the first independent audit of a company’s financial statements, usually because the business has grown beyond the audit exemption thresholds or needs an audit for another reason. If you are not sure, speak to an auditor to confirm whether an audit is required.

When should we start preparing for our first audit?

As soon as an audit looks likely. Early preparation helps identify gaps in records, reconciliations, controls and supporting evidence.

What documents are needed for a first audit?

Auditors usually need accounting records, reconciliations, bank statements, invoices, contracts, payroll records, VAT records, stock information, fixed asset details and evidence supporting key balances.

Why can a first audit be difficult?

The first audit can be harder because the business may not have kept records in an audit-ready format before.

What should I look for in an auditor?

Look for a firm with genuine experience in your sector, since the issues that come up in a manufacturing audit are quite different from those in a services business or a group structure.

It’s also worth considering the size and structure of the firm against the size of your own business, so you get a team that has capacity to deliver on time without you being a small fish in a large pond.

Clear communication matters too. You want an auditor who explains what they need and why, rather than simply issuing requests, and who is willing to have an open conversation about timelines, fees and how they’ll work with your finance team.

What are the common steps of an audit once it commences?

Most audits follow a similar pattern, even though the detail varies by business. Planning comes first, where the auditor gets to know your business, identifies areas of risk and agrees timelines and information requirements with you.

Fieldwork follows, during which the auditor reviews records, tests transactions and requests evidence to support the figures in your accounts.

Once fieldwork is complete, the auditor works through any queries that have arisen and finalises their findings. The audit then concludes with the auditor issuing their opinion on the financial statements, along with any recommendations for improving controls or processes going forward.

If you need guidance on the audit process, please feel free to get in touch with our team at ML Audit.