Having sat on both sides of the audit table — conducting audits at PwC and preparing for them across dozens of mid-market companies — the single most consistent observation is this: companies do not fail audits because their numbers are wrong. They fail because they cannot prove their numbers are right.
The distinction matters. An auditor’s job is not to find errors (though they will). It is to obtain sufficient appropriate evidence to form an opinion on whether the financial statements are free from material misstatement. “Sufficient appropriate evidence” is the operating standard. Everything an auditor does — every request, every test, every follow-up question — is in pursuit of that evidence.
Understanding what auditors expect, and why, transforms the audit from an adversarial process into a cooperative one. It also cuts audit fees, because the single biggest driver of audit cost in the mid-market is time spent chasing information that should have been ready on day one.
The Evidence Standard
Auditors assess evidence on two dimensions: sufficiency (enough of it) and appropriateness (the right quality). A verbal confirmation from the FD that a balance is correct is evidence, but it is not sufficient or appropriate on its own. A bank statement confirming the cash balance is both.
The hierarchy of audit evidence, from strongest to weakest:
External, independent confirmation. Bank confirmations, debtor confirmations, supplier statements. The auditor contacts the third party directly. This is the strongest evidence because it is independent of the company being audited.
External documentation held by the company. Invoices from suppliers, contracts with customers, bank statements. External in origin but held and presented by the client. Strong, but the auditor considers the risk that the client could have altered or selected documents.
Internal documentation with external corroboration. Management accounts that reconcile to the bank, a revenue schedule that ties to contracts. The internal document is supported by external reference points.
Internal documentation alone. Journal entries, internal memos, management estimates. The weakest form of evidence because it is entirely within the client’s control. Auditors rely on this only when corroborating evidence is not available, and they apply more scrutiny.
ICAEW standards require auditors to obtain evidence that is proportionate to the risk of the balance or transaction class. High-risk areas — revenue, management estimates, related-party transactions — require more evidence and stronger evidence than low-risk areas.
What Frustrates Auditors Most
Having worked with audit teams across dozens of engagements, the frustrations are remarkably consistent:
Late PBC items. The Prepared by Client list is issued weeks before the audit starts. When items arrive late — or not at all — the audit team cannot work efficiently. Team members sit idle or are redeployed. When the items finally arrive, the audit restarts in a fragmented way. This is the primary cause of audit overruns and fee increases.
Reconciliations that do not reconcile. A bank reconciliation is provided, but the reconciling items are stale — some have been sitting unresolved for months. A debtors control account reconciliation shows a difference of £50,000 with a note saying “under investigation.” These are not reconciliations. They are lists of unresolved problems.
Missing support for judgements. The bad debt provision is £120,000. How was it calculated? Which customers? What evidence of impairment? If the answer is “the FD estimated it based on experience,” the auditor must either do the work themselves (at your cost) or qualify the area.
Inconsistent data. Management accounts do not reconcile to the trial balance. The trial balance does not reconcile to the statutory accounts. Different versions of the same schedule show different numbers. Every inconsistency requires investigation, and investigation requires time.
Changes after fieldwork. The auditor completes testing on revenue. Two weeks later, the client posts adjustments that change the revenue figure. The testing is now invalid and must be repeated. Late adjustments are sometimes unavoidable, but chronic late adjustments signal a close process that is not working.
What Good Preparation Looks Like
A clean trial balance that reconciles to the management accounts and the draft statutory accounts before the audit starts. Any adjustments needed should be posted before fieldwork, not during.
A complete PBC package delivered on time. Every item on the PBC list, clearly labelled, with supporting documentation attached. If an item is not available, communicate that proactively with an expected date — do not let the auditor discover the gap on site.
Reconciliations for every material balance with no aged, unresolved items. If a reconciling item is older than 30 days, it should be investigated and resolved before the audit.
Documented estimates with methodology, data inputs, and sensitivity analysis. KPMG standards require auditors to evaluate the reasonableness of management estimates. Providing the methodology upfront avoids extended discussions during fieldwork.
A single point of contact who understands the full set of financial data, can retrieve supporting documents, and can answer questions without routing every query through the FD.
What This Means for Mid-Market Companies
The audit relationship is a commercial one. Auditors charge by the hour. Every hour they spend chasing information, reconciling inconsistencies, or waiting for data is an hour you pay for. The most cost-effective audit strategy is not negotiating the fee — it is being ready.
Build the PBC list into your monthly close process. If every month produces reconciled balances, documented judgements, and a clean trial balance, the annual audit becomes a matter of packaging what already exists — not a scramble to create it under time pressure.
The standard is not complicated: complete data, consistent data, evidenced data, on time. Companies that deliver this find their audits shorter, cheaper, and less disruptive. Those that do not find the opposite — and wonder why the audit fee keeps going up.