USA Financial auditing for technology companies
What are the drivers and risks facing your technology business?
The technology industry has proven highly resilient and innovative in the face of global turbulence. Yet with growth and transformation comes greater financial complexity and potential threats.
Technology companies are entering into increasingly complicated agreements across revenue, equity and other financial transactions. Many are also experiencing a significant scaling of operations. In the race to expand, there is a potential threat to internal controls. IT infrastructure, finance team size, transaction interpretation and accounting are often left behind. This could result in incorrect financial reporting.
Whether you’re an early-stage business with concerns around technical accounting, a mid-sized firm dealing with rapid growth, or a larger company aiming to optimise your operations, Evelyn Partners can help.
How is an audit for a technology company different to an audit for other types of businesses?
An audit for a technology company may not be similar to an audit for any other type of business. Whilst every audit independently reviews and evaluates company’s accounts and financial reports the issue is that there are specific rules of accounting and internal control processes that apply to technology companies. Many auditors audit multiple industries and don’t specialise in technology - and it shows. Many auditors who are not technology specialists at best don’t understand the acronyms and jargon used in the technology industry and at worst, do not have the knowledge of nuances specific to this sector. This is where costly mistakes can occur, especially when it comes to exiting specific agreements.
At Evelyn Partners, we have a team of auditors who deal solely with technology companies. We appreciate the unique challenges posed by the technology sector and know how to apply accounting standards specifically to these businesses. We also understand the implications of most business decisions. For example, a technology company has decided to issue preference shares but don’t fully consider how this is going to impact the numbers. Not many audit firms pick up on the point that even if somebody's investing in equity (which is a shareholder) they could be deemed a creditor from an accounting perspective. That has a massive implication.
What audit services does Evelyn Partners offer for technology firms?
Our specialist technology audit team offers a range of services across a number of technology sub-sectors including:
- Fintech
- Gaming
- Communications
- Education and medical technology
- Licensing or software as a service
- Cloud
- Big Data
- Internet of Things (IoT)
Whatever your company’s scale or financial situation, we can provide:
- Unique insights and added value. Our highly tailored, professional service can contribute to your objectives, deliver helpful insights, pre-empt issues and offer added value
- Tools and data analytics. Our approach blends data analytics, control-based procedures, technological tools and bespoke testing that match the risks associated with your organisation
- Support with internal controls. We take a long-term view of internal controls, encouraging you to think about them early on. We understand that once internal controls are implemented, it takes around two years for them to come into force. Our team will work with your business throughout this period to help the company grow
- Help with technical accounting. We understand the value and importance of technical accounting and never rush things through
- Future-proofing assistance. We deliver a future-focused service that ensures your governance, internal controls, risk management and financial reporting are aligned to support your ambitions
What makes our auditing service for technology companies stand out?
Evelyn Partners offers a highly tailored approach that focuses on both short-term goals and the bigger picture. We don’t view auditing as a one-off job. Instead, we’re keen to collaborate in the long term as your company grows.
Hands-on senior team
Our service is truly partner-led. Your dedicated partner will lead key health-check discussions and conversations around business processes. They’ll be actively involved during each stage of the audit process, helping you get the answers you need, when you need them.
Tailored strategy
We’re a large enough firm to fully support our clients, with extensive resources and technology sector expertise. We never take a one-size-fits-all approach, instead tailoring our audit procedures to match the specific risks associated with each client. We’ll develop a blueprint and work with you to increase the efficiency and effectiveness of the audit process.
Our culture
Our culture is built on a genuine interest in our clients, focusing on their challenges, growth ambitions and wider commercial requirements. We aim to deliver innovative yet pragmatic advice and solutions, tailored to your unique circumstances. We take the time to get to know you and understand your objectives, needs and aspirations, as well as longer-term challenges.
Partnership with Larato
We’ve teamed up with business development specialist Larato to further enhance our offering. This partnership can help you build a realistic, effective strategy and go-to market plan that delivers profitable revenue growth.
What specialist tools and technologies do we use?
Our team uses a range of technological tools to:
- Ensure efficiency and robustness in our audits
- Improve the user experience, with less time required by your finance team
- Get the focus right by redirecting time to issues that matter to you
- Significantly reduce time-consuming data preparation
- Deliver a secure, encrypted service that follows ISO 27001 guidelines
The tools we use include:
- Inflo. An online data-sharing portal featuring real-time request lists and visual aids on the status of audit requests. These lists can be quickly allocated to team members responsible for each audit area, ensuring no bottlenecks occur. Inflo also uses transactional financial data, allowing audit teams to benchmark against similar entities within their industry and identify anomalies
- DataSnipper. Offers fast cross-checking and document-matching to streamline the work of our team
- Excel Analyser. Reviews large Excel models used in forecasting and valuations, providing feedback to audit teams over potential formula issues
Frequently asked questions about financial auditing for technology companies
Who are Evelyn Partners?
We are the UK’s leading integrated wealth management and professional services group, so we can look after our clients’ combined wealth and tax needs, personal and business. We are the 6th largest accounting firm in the UK*, generating in excess of c£600m of revenue. As a group, we have 50+ offices across the UK, employ c3,200 people and manage c£55bn client assets (as at June 2023). We also have a strong global presence and our global network serves clients in over 100 countries. We are a founding member of our global network, together with CliftonLarsonAllen LLP, the 8th largest accountancy firm in the United States.
*Based on total fee income for the last financial year - Accountancy Age 2022
Which technology businesses need a financial audit?
Businesses usually need a financial audit once they reach a certain size or if they are a subsidiary of a larger worldwide group that has breached certain size requirements. They’ll normally have to meet two of the following three criteria:
- More than £5.1 million in assets
- Over £10.2 million in revenue
- More than 50 employees
As a result, auditing may be a requirement for start-up technology firms, as well as mid-sized and larger-scale companies.
What complex transactions are technology companies commonly involved in?
Technology companies regularly enter complex transactions such as:
- Warrants
- Different classes of shares and share options
- Revenue recognition specific to technology firms
- Capitalising or expensing development costs
- Acquisitions
There are significant accounting implications if a management team incorrectly accounts for such transactions.
What is a tailored audit approach for technology companies?
A tailored audit approach for technology companies involves taking a firm’s unique circumstances and needs into account to find specific solutions. Our experience is that auditing is not a one-size-fits-all service. We involve our senior team right from the beginning to understand the exact nature of your business, identify potential issues and agree on the best strategy.
Our approach is forward-looking, identifying potential added value and efficiencies across your operations, IT systems, finance teams, risk registers, board reporting and more.
What reduces the cost of an audit for a technology company?
External audit costs are based on the estimated time it will take to complete the audit procedures. This estimate depends on how prepared the business is, complexity of transactions and robustness of internal controls.
The following can significantly reduce audit fee quotes:
- Internal controls. Every audit assesses the design and implementation of internal controls. If the controls are robust, an auditor may place reliance on them, resulting in a more efficient audit with higher confidence in results
- Finance team size. If the finance team is the right size in terms of depth and financial reporting skills, the level of preparedness is likely to reduce costs
- Automation. Robust IT controls and process flows underpinning automation can also reduce the cost of an audit
How can my business benefit from the partnership with Larato?
The challenge when providing audit services is that an audit is backwards-looking, but management, board members and shareholders are looking forwards. Our partnership with Larato aims to bridge this expectation gap.
Larato is a consulting firm that works with companies to build realistic and effective strategies and go-to-market plans which deliver profitable revenue growth. It’s backed up by a proprietary data platform.
The technology businesses who we work with enjoy a complimentary discovery session to see if they can benefit from this partnership. We don’t earn any commissions from the partnership as it’s a value-added service offering.
What are the common auditing challenges for technology firms?
Common auditing challenges for technology firms include:
- Management failing to identify accounting implications, or not accounting for complex transactions appropriately. A shortage of technical expertise or resources may be the cause
- A lack of appropriate systems and processes to tackle the volume of transactions or analyse data
- A failure to maintain sufficient books and records that would provide relevant and timely audit evidence
What happens when Evelyn Partners are appointed as a business’s technology audit partner?
Often, technology companies contact us if they are unhappy with the service they are receiving from their current auditor. Usually, we follow this up with a one to two hour initial call to discuss frustrations and needs. If a company decides to work with us, we’ll then host a detailed transition workshop with our senior management team. We dedicate 10 to 15 hours of partner time to planning this day-long workshop to cover all bases and allow for in-depth reviews and discussions.