Why are audits important for PE-backed businesses?
Auditing is essential for private equity (PE) backed businesses because it ensures financial transparency, boosts investor confidence, and uncovers risks. This helps PE firms enhance value and make strategic decisions. In short, audits drive growth and success.
As audit regulations tighten, the cost and duration of audits are rising for both auditors and management teams. With the upcoming implementation of the Auditing, Reporting and Governance Authority (ARGA) potentially extending audit timelines and costs, finance teams should view audits as valuable tools for delivering business value. Audit firms have invested heavily in recent years to ensure high-quality audits, focusing on technology, data, and analytics tools to provide insightful financial opinions. This positions auditors uniquely, as they receive extensive information from across the business, often in greater detail than internal teams. This wealth of data allows auditors to offer significant insights, transforming audits from mere compliance exercises into value-generating processes.
Unlocking audit value
To fully harness this potential, proactive engagement between management and auditors is essential. This collaboration helps identify key business risks, both financial and commercial, ensuring focused interactions that deliver audit value. Benefits include time savings for finance teams, timely reporting, and efficient transaction structuring to achieve optimal commercial and financial outcomes.
From the auditor’s perspective, this approach enhances audit quality by concentrating on high-risk areas and providing robust challenges to management. Continuous risk assessments can identify future risks early, allowing pre-emptive actions to mitigate potential issues.
Auditors can leverage data-driven analysis to drive operational improvements and synergies across the business. Sharing insights on transaction cycles and approval processes helps management reduce risks and streamline operations.
In the medium term, auditors can offer feedback on the alignment of a business’s back office with its growth ambitions, aiding in risk assessment and informing investment decisions. This continuous feedback loop ensures high-quality audits that focus on key risks, delivering efficient audits in current and future years, reducing costs, and saving time for all parties.
As audit pressures increase, resulting in higher costs, maintaining transparent and open dialogue with the right audit partner can transform the audit process into a valuable investment rather than a compliance exercise. This creates a win-win scenario for both auditors and businesses.
How can HaysMac help?
In an evolving regulatory landscape, turning audits into strategic assets is more important than ever, especially for PE backed businesses where compliance is paramount. By fostering a collaborative relationship with your audit partner and leveraging their insights, you can transform the audit process into a powerful tool for driving business value and achieving long-term success. HaysMac is on hand to help – get in touch with Mike Crowson, Director and Head of Private Equity, to find out more.
