Starting a business - Understanding Audits

G-MAN2004 said:
Wait, so if I set up a photography business, and used Photoshop to edit the pics and whatever else, I'd have to prove to someone that I bought it?
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If you're claiming it as an expense, you should be able to prove it from the outset as HMRC may ask. It may also come up as a point on your audit if your business were large enough to be audited and the audit included a check of your software.
 
[TW]Fox;18244915 said:
If you were ever asked it isnt hard is it? Just show them the box and CD or perhaps the invoice.
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It's not that I'm confused about. I just never thought there would be anyone to ask such questions in the first place.

vonhelmet said:
If you're claiming it as an expense, you should be able to prove it from the outset as HMRC may ask. It may also come up as a point on your audit if your business were large enough to be audited and the audit included a check of your software.
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Ah I see, thanks.
 
G-MAN2004 said:
It's not that I'm confused about. I just never thought there would be anyone to ask such questions in the first place.
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The reason the auditors would ask is that if you are using a whole load of pirated software then you are essentially sitting on an enormous potential liability. If FAST come knocking you could end up being fined, I don't know, £300k or something silly, so the auditors will want to include a provision in your accounts just in case that happens. So either you put through the provision and disclose the fact that you're using pirated software and screw up your profits figure, or the auditors don't sign off the accounts if the provision would be material to the balance sheet. Of course, what you do at that point is find some less scrupulous auditors...
 
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Seriously, it seems no one in this thread actually knows what an audit is.

The taxman don't do audits. They're inspections.

Being owned by shareholders does not protect against audits.

The likelihood of an auditor actually checking software licenses is low, potentially check invoices but the software should be fairly immaterial. Substantive testing would be unlikely to pick it up as well depending on sampling method.

Oh, and the GNU public license isn't for commercial ventures unless I'm mistaken?

Anyway, unless you start turning over 5.6million, employ over 250 staff or have a massive balance sheet you won't need a statutory audit. Done by an audit firm not anyone else.
 
banja said:
Whomever it is who audits.
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Companies Act 2006 sets the limit as to who HAS to have an audit. This is large companies or publicly accountable companies.

The taxman doesn't "audit". They launch enquiries or make inspections but they're not audits.

Audits have nothing (note: nothing) to do with tax returns.

Audits have everything to do with financial statements (annual accounts). The purpose of an audit is to ascertain whether a set of accounts "show a true and fair view" of the accounts.

Edit: Other companies may choose to have audits in order to gain confidence over their controls or indeed accounts. An audit encourages a company to maintain good controls. Also, there are times where a company may not legally need to have an audit but are forced to anyway. Such as a bank requiring audited accounts on a yearly basis in order to give lending.
 
A friend who is in the same industry as me was 'inspected' or audited (by whom I don't know) where he had to show evidence of all his accounts. He said it took ages and was a nightmare.

My question really was, how does the government ensure honest self assessment?
 
banja said:
A friend who is in the same industry as me was 'inspected' or audited (by whom I don't know) where he had to show evidence of all his accounts. He said it took ages and was a nightmare.
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That would be an audit performed by accountants.

My question really was, how does the government ensure honest self assessment?
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Self-assessment of tax returns? They don't ensure honest returns. HMRC effectively polices returns. You could quite easily be dishonest and never get caught or even inspected. Depends how well you do it.
 
vonhelmet said:
No, I mean clients call things the wrong things all the time, so it's not a wonder people are doing the same here.

Tax investigation insurance? Yeah, I know what that is. Tax audit insurance... erm...
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The ones I hate the most are things like "cash". Great. Cash. For what? That's right, you don't even know either as every ***** thing is "cash"... :D
 
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