Key points
- Understand the requirements. Knowing the regulatory landscape and what an audit actually demands is essential for first-time success.
- Expect a step-change. Moving into an audited environment brings new levels of discipline, governance and scrutiny that many organisations underestimate.
- Navigate the challenges with the right support. The right auditor will guide you through complexities, reduce disruption and help you succeed in your first audit.
For many growing businesses, the need for an external financial statement audit arrives at a pivotal moment. While under the Corporations Act 2001 private companies are ordinarily required to lodge audited financial statements once they meet at least two of the following thresholds – $50 million in revenue, $25 million in gross assets, or 100 employees – this is only one of several triggers.
Audits are also commonly required at the request of a financier, by investors or shareholders, as part of a private equity acquisition, or in preparation for a capital raise, sale or IPO.
Regardless of the trigger, a first-time audit marks a significant step in a company’s maturity. And for many CFOs and finance managers, it can feel like stepping into unfamiliar territory.
What is an external financial statement audit?
At its core, an external audit is an independent assessment of whether your financial statements present a true and fair view in accordance with Australian Accounting Standards.
The role of the external auditor is not to maintain your books and records, clean up your accounts, or prepare the financial statements for you. Independence requirements prohibit this.
Instead, an audit is a structured, evidence based assessment designed to give confidence to boards, lenders, investors and future buyers regarding the integrity of your financial reporting. The typical process includes a planning and risk assessment stage, an interim audit and a final year-end audit.
The benefits of an audit
A quality audit delivers far more than compliance. It enhances transparency for boards, lenders and investors, improves the accuracy and reliability of financial information, provides external feedback on governance and internal controls, and increases the credibility of your financial statements.
For businesses contemplating a future transaction, audited financial statements can materially improve buyer confidence and valuation outcomes.
The realities and challenges of your first audit
If you’re facing your first audit, the first year is always the most demanding. Not because anything is wrong, but because everything is new. These challenges are common and completely normal.
1. The requirements feel overwhelming at the start
The Corporations Law, Audit Standards, Australian Accounting Standards and Interpretations, ASIC guidance and other regulatory standards introduce jargon and a level of complexity that can feel daunting. Owners, Boards and management often raise concerns that certain requirements and disclosures are sensitive or highly technical. This is simply the reality of moving into a regulated reporting environment.
Finance teams often discover they need to uplift technical capability, documentation and processes.
2. Opening balances and comparative information take time
Auditors need comfort over the numbers you start with, not just the numbers you end with. This often requires revisiting historical transactions, changing accounting practices and developing new accounting policies – particularly when applying AASB 1 First-time Adoption of Australian Accounting Standards.
Planning a first-time audit well in advance is critical. For example, ensuring the auditor attends opening and year-end stocktakes is essential; if the appointment occurs after the balance date, this can create complications and potential qualifications to the audit opinion.
3. The level of evidence required is often higher than expected
Audit evidence is the backbone of the process. Clients are often surprised by the level of detail required in reconciliations, the sample sizes, the need for complete supporting documentation and the importance of audit ready records.
When records are incomplete or reconciliations unclear, audit risk increases – and with it, the extent of testing required. Helping clients understand how to reduce audit risk is one of the most valuable aspects of the first-year journey.
Auditors must test reports, balances and transactions and obtain corroborative evidence. This is not because they doubt management, but because professional standards require sufficient appropriate audit evidence and the exercise of professional scepticism. The level of documentation required by Auditing Standards and regulators is extensive.
4. A well executed audit involves more than just finance
An audit does not just impact finance personnel. While finance may lead and coordinate the process, warehouse staff, operations managers, IT teams and project managers may all need to participate in walkthroughs or provide information. Clear communication and expectation setting across the business is essential to keep the process moving efficiently.
How we’ve helped clients through the process
Recently, we supported two organisations through their first external audit. One was a fast-growing group that had just crossed the $50 million revenue threshold. The other had been acquired by a private equity firm and required a full audit under tight timelines.
We were engaged early in both cases and began by running planning workshops with key stakeholders to ensure alignment from the outset. During these sessions, we explained the audit requirements in clear, practical language and agreed on action plans, roles and responsibilities.
Throughout the engagements, we guided management through each requirement, including the adjustments needed to the opening and closing balance sheets, and coordinated with valuation, tax and IT specialists to support a smooth and well governed process.
Each audit was managed end to end, with issues resolved collaboratively and communication kept open, calm and constructive. To support transparency and governance, we issued comprehensive board reports outlining the audit approach, adjustments, misstatements, insights and internal control recommendations. Both audits concluded with debriefs highlighting improvement opportunities for the following year.
The outcome was two very satisfied clients who gained clarity and strengthened their processes.
Getting the right advice matters
A first-time audit is not just a technical exercise, it transforms how the business reports, governs and understands its financial performance. It introduces new expectations, new disciplines and, for many organisations, a new level of transparency. The right audit firm makes this transition significantly smoother.
Choosing the right team to support you is not just about technical capability. It’s also about judgement and the ability to interpret complex requirements, focus attention on what truly matters and guide management through unfamiliar territory with clarity and confidence. Experience across industries also matters. Patterns repeat, issues recur and a firm that has seen many first-time audits and complex issues can anticipate challenges long before they surface.
Equally important is perspective. Your first audit often reveals blind spots, inefficiencies or opportunities to strengthen reporting and controls. An experienced auditor brings an external viewpoint that helps management see the business differently and make more informed decisions.
Ultimately an audit is a conversation as much as a process. The real value comes from discussing issues openly, challenging assumptions constructively and supporting management through a demanding but ultimately rewarding journey.
A first-time audit doesn’t need to be daunting. If you have the right support, it becomes a catalyst for stronger reporting, better governance and enhanced processes.
If you’re approaching your first audit and you need advice on how to navigate the process, please don’t hesitate to reach out.
