Business Audit Services: A Guide for New Zealand Businesses

Accurate financial information is important for businesses of every size. Owners, directors, shareholders, lenders and other stakeholders rely on financial records to understand how a business is performing and to make informed decisions.

Business audit services provide an independent examination of a company’s financial information, processes and relevant supporting records. Depending on the type of engagement, an audit can help determine whether financial statements are materially accurate and prepared in accordance with the applicable financial reporting framework.

In New Zealand, some businesses are legally required to have their financial statements audited, while others may choose an audit voluntarily. Understanding the purpose of business auditing services, what the process involves and how to prepare can help businesses approach an audit more effectively.

What Are Business Audit Services?

Business audit services involve the independent examination of financial information and related records.

A financial statement audit is designed to provide reasonable assurance that financial statements are free from material misstatement, whether caused by fraud or error.

Auditors use professional judgement and risk-based procedures to gather sufficient appropriate audit evidence. They may examine transactions, account balances, accounting estimates, internal controls and financial statement disclosures.

The External Reporting Board (XRB) establishes New Zealand’s auditing and assurance standards framework. Standards such as ISA (NZ) 200 set out the overall objectives and responsibilities of independent auditors conducting financial statement audits.

Business auditing should not be confused with bookkeeping or accounting. Accounting generally involves preparing and maintaining financial information, while auditing involves independently examining that information.

Why Do Businesses Use Audit Services?

Businesses may engage audit services for different reasons.

For some organisations, an audit is a statutory requirement. For others, it may provide additional confidence to stakeholders even when there is no legal requirement.

Independent Review of Financial Information

An audit provides an independent assessment of financial statements.

This can be valuable when shareholders, lenders, investors, boards or other stakeholders rely on the company’s financial information.

Support for Compliance

Certain New Zealand entities are required to prepare and submit audited financial statements. Obtaining appropriate business audit services can help those organisations meet applicable reporting obligations.

Identification of Financial Reporting Issues

During an audit, the auditor may identify errors, inconsistencies, unsupported balances or other matters that require attention.

Greater Stakeholder Confidence

Independent assurance over financial reporting can provide greater confidence to people who rely on a company’s financial information.

Improved Financial Processes

Although the primary purpose of an external financial statement audit is not to improve business operations, the audit process can highlight weaknesses in processes and controls that affect financial reporting.

Which New Zealand Businesses Need an Audit?

Not every New Zealand business is required to have its financial statements audited.

Audit requirements depend on factors such as the entity’s legal structure, size, ownership and regulatory status.

The Companies Office states that some large New Zealand companies and all large overseas companies must file annual audited financial statements. All Financial Markets Conduct (FMC) reporting entities must also lodge annual audited financial statements.

The definition of a large company can depend on asset and revenue thresholds, overseas ownership and certain subsidiary relationships.

Because requirements vary between entities, businesses should assess their specific circumstances to determine whether an audit is legally required.

What Does a Business Auditor Examine?

The areas examined during an audit depend on the organisation and the risks identified during the engagement.

A business auditor may examine:

• Revenue and sales
• Operating expenses
• Cash and bank balances
• Accounts receivable
• Accounts payable
• Inventory
• Fixed assets
• Loans and borrowings
• Payroll
• Tax-related balances
• Investments
• Provisions and liabilities
• Related-party transactions
• Accounting estimates
• Financial statement disclosures

The auditor does not necessarily examine every transaction.

Instead, audit procedures are designed according to assessed risks and the need to obtain sufficient appropriate evidence.

For example, an auditor may select a sample of transactions for detailed testing rather than reviewing every transaction individually.

The Business Audit Process

While every engagement is different, business audit services generally follow a structured process.

1. Audit Planning

The auditor begins by planning the engagement and determining the areas that require attention.

ISA (NZ) 300 addresses the auditor’s responsibility to plan an audit of financial statements. Effective planning helps establish the nature, timing and extent of audit procedures.

2. Understanding the Business

The auditor develops an understanding of the organisation and its operating environment.

This may include reviewing the company’s business activities, accounting systems, internal controls, financial reporting processes and significant transactions.

3. Risk Assessment

Auditors identify and assess risks that could result in material misstatements in the financial statements.

Areas involving significant management judgement, unusual transactions or complex accounting treatments may require particular attention.

4. Gathering Audit Evidence

Auditors obtain evidence to support their conclusions.

Evidence may include invoices, contracts, bank statements, accounting records, confirmations, payroll information and other supporting documentation.

ISA (NZ) 500 establishes requirements concerning the auditor’s responsibility to obtain sufficient appropriate audit evidence.

5. Testing Financial Information

The auditor performs procedures on selected transactions, account balances and disclosures.

The exact procedures depend on the risks identified and the circumstances of the engagement.

6. Evaluating Findings

The auditor considers the results of the testing and evaluates whether identified errors or other matters could materially affect the financial statements.

Where appropriate, the auditor may discuss findings with management and request additional evidence or adjustments.

7. Audit Reporting

After completing the necessary procedures, the auditor forms an opinion and prepares the independent auditor’s report.

ISA (NZ) 700 addresses the auditor’s responsibility to form an opinion on financial statements and report that opinion.

Understanding Business Audit Opinions

An audit opinion communicates the auditor’s conclusion regarding the financial statements.

An unmodified opinion may be issued when the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.

There are also circumstances where an auditor may issue a modified opinion.

The type of modification depends on the circumstances and the significance of the matter involved.

An audit opinion does not mean that a business is guaranteed to be profitable or financially successful. It relates specifically to the financial statements and the applicable reporting framework.

Business Audit Services vs Accounting Services

Business auditing and accounting are separate functions.

Accounting services can involve preparing and maintaining financial records, managing transactions, preparing financial statements and handling other financial administration.

Business audit services involve independently examining financial statements and supporting evidence.

The distinction is particularly important for external audits because auditors must maintain appropriate independence and objectivity.

A business may therefore work with an accountant throughout the year and engage an independent auditor for its financial statement audit.

Business Audit vs Internal Audit

A business audit and an internal audit can have different objectives.

A financial statement audit primarily focuses on providing an independent opinion on the financial statements.

Internal audit generally has a broader focus and may examine:

• Risk management
• Governance
• Internal controls
• Compliance
• Operational processes
• Fraud risks
• Business efficiency

Internal audit can therefore complement external financial auditing, but the two functions are not interchangeable.

Benefits of Professional Business Audit Services

Professional business auditing can provide several benefits.

Independent Assurance

An external auditor provides an independent perspective on the company’s financial statements.

Better Financial Reporting

Audit procedures may identify issues that management can address before they become more significant.

Improved Documentation

Businesses preparing for an audit generally need to maintain organised supporting documentation for financial transactions and balances.

Greater Accountability

An independent audit can strengthen financial accountability to shareholders, directors and other stakeholders.

Support for Business Growth

As a business grows, its financial transactions and reporting requirements may become more complex. Regular independent auditing can help provide confidence in the information being reported.

How to Prepare for a Business Audit

Good preparation can make an audit more efficient.

Businesses should maintain accurate accounting records throughout the year rather than waiting until the audit begins.

Useful documentation can include:

• Financial statements
• General ledger
• Bank statements and reconciliations
• Accounts receivable schedules
• Accounts payable schedules
• Inventory records
• Fixed asset registers
• Loan agreements
• Major contracts
• Payroll records
• Tax documentation
• Details of related-party transactions
• Supporting documents for significant transactions

It is also useful to document major changes within the business.

Acquisitions, new loans, restructuring, significant contracts, unusual transactions and major accounting estimates may require additional information during the audit.

Choosing Business Audit Services in New Zealand

Selecting the right audit provider is an important decision.

Relevant Experience

An audit provider with experience in your industry may understand the financial reporting issues and risks commonly associated with your business.

Technical Knowledge

Auditors need appropriate knowledge of New Zealand financial reporting and auditing requirements.

The XRB auditing framework covers areas including audit planning, risk assessment, audit evidence, fraud, quality management and auditor reporting.

Independence

Independence is an important consideration when selecting an external business auditor.

Communication

A good audit provider should communicate clearly about information requirements, timelines, findings and the final report.

Qualifications and Registration

Where an audit is legally required, businesses should confirm that the auditor or audit firm meets the applicable qualification, licensing and registration requirements.

The Companies Office maintains information relating to auditor licensing and registered audit firms.

What Can Cause Delays During a Business Audit?

Several issues can make an audit take longer than expected.

Incomplete accounting records are one common problem. Missing invoices, unreconciled bank accounts, incomplete schedules or unavailable supporting documentation can require additional follow-up.

Other potential causes include:

• Significant unexplained transactions
• Poorly maintained financial records
• Delayed responses to auditor requests
• Complex accounting estimates
• Changes in business structure
• Related-party transactions requiring additional information
• Incomplete documentation

Maintaining financial records consistently throughout the year can help reduce these issues.

How Aurora Financials Can Help

Preparing for a business audit starts with maintaining reliable financial information.

Aurora Financials can support businesses with accounting and financial reporting processes that help create an organised foundation for audit preparation.

Maintaining accurate records, completing regular reconciliations and keeping supporting documentation properly organised can make it easier to respond to information requests during an audit.

For businesses preparing for their first audit, establishing consistent financial processes can also reduce last-minute preparation and help management identify potential issues earlier.

Aurora Financials can help businesses maintain organised financial information and develop financial processes that support accurate reporting and ongoing audit readiness.

Final Thoughts

Business audit services provide an independent examination of financial information and can play an important role in financial reporting, regulatory compliance and stakeholder confidence.

Not every New Zealand business is legally required to undergo an audit. However, for organisations that are subject to statutory requirements – or those that voluntarily want independent assurance – professional auditing can provide valuable insight into the reliability of financial statements.

Good audit preparation begins well before the auditor arrives. Accurate accounting records, regular reconciliations, appropriate documentation and clear financial processes can make the audit process more efficient.

Whether an audit is required by law or undertaken voluntarily, choosing an experienced and independent audit provider can help businesses approach their financial reporting responsibilities with greater confidence.

Frequently Asked Questions About Business Audit Services

1. What are business audit services?

Business audit services involve an independent examination of a company’s financial statements, transactions, balances and supporting documentation. The auditor obtains evidence and forms an opinion in accordance with applicable auditing standards.

2. Does every business in New Zealand need an audit?

No. Audit requirements depend on factors such as business size, ownership, legal structure and regulatory status. Certain large companies and FMC reporting entities are subject to statutory audit requirements.

3. What documents are needed for a business audit?

Auditors may request financial statements, general ledgers, bank reconciliations, invoices, contracts, payroll records, asset registers, loan documentation, tax records and supporting information for significant transactions.

4. How long does a business audit take?

The timeframe varies depending on the size and complexity of the business, the scope of the audit and the quality of its financial records. Promptly providing requested information can help avoid unnecessary delays.

5. What is the difference between a business audit and an internal audit?

A financial statement business audit primarily provides an independent opinion on financial statements. An internal audit generally has a broader focus on areas such as risk management, governance, internal controls, compliance and operations.

6. Can a business benefit from an audit even when it is not legally required?

Yes. A voluntary audit can provide independent assurance over financial information and may be useful where shareholders, lenders, investors or other stakeholders want greater confidence in the company’s financial reporting.