What to Do After a Financial Audit

After a financial audit, the step before approving the next financial commitment is to write down which audited figure supports it. In 2021, the Financial Reporting Council sanctioned Grant Thornton over its audits of Patisserie Holdings for 2015 to 2017. Each year had received a clean opinion. The case shows why the opinion and the evidence behind a particular decision need separate attention.

A financial audit provides reasonable assurance about whether financial statements are free from material misstatement under the applicable reporting framework.

Patisserie Holdings received opinions that the FRC found unsupported

Patisserie Holdings was the parent of the group trading mainly as Patisserie Valerie. Its audited financial statements carried clean opinions for the years ending September 2015, 2016 and 2017. In October 2018, the company announced potentially fraudulent accounting irregularities. It later entered administration. These events are described in the FRC's September 2021 sanctions announcement.

The FRC identified repeated failures concerning revenue, cash, journals and fixed asset additions. Grant Thornton and engagement partner David Newstead accepted failures in their audit work. The regulator found that the audits had failed to provide reasonable assurance against material misstatement. That finding concerns the performance of these audits. It does not establish that financial audits have no value.

For a reader deciding what to do after an audit, the important distinction is between receiving an opinion and understanding its support. The existence of an opinion does not resolve contradictory evidence. A decision paper that quotes the opinion still needs to identify the financial information on which its recommendation depends.

The FRC Final Decision Notice gives a concrete example. Auditors relied on management for the list of bank accounts. Bank responses indicated that the information might be incomplete, but the inconsistencies were not resolved. Some accounts had nil or very small year-end balances. The FRC explained that this did not rule out material transactions during the year.

The report also describes missing reconciliations and insufficient review of account activity in the 2017 audit. It distinguishes a balance confirmed at year end from evidence about transactions and reconciling items. The notice expressly makes no finding of fraud. Its findings concern failures to meet audit requirements, regardless of whether fraud had occurred.

This detail matters because a financial figure supports only the claim that the evidence can justify. A confirmed balance and a complete account history answer different questions. Check what the evidence establishes. A document can be genuine and still leave a material question unanswered. The question depends on the figure being used and the commitment being considered.

The following application is a proposed decision check, not a description of a process used by Patisserie Holdings. If a funding proposal depends on available cash, identify the exact balance and its date. Then identify the assumption connecting that balance to the proposed payment. Cash reported at an earlier date and cash available when payment is due are different claims.

This check belongs with the proposed commitment. It should not become an attempt to repeat every audit procedure. The relevant decision assumptions are those whose failure could change the choice. A proposal may rely on collections arriving before a payment, or on funds being available to the entity making it. State whichever condition actually matters.

Patisserie Holdings does not prove that this check would have prevented its collapse. It gives a documented reason to question unresolved inconsistencies within audit evidence. Audit failures and audit scope are different problems. The first requires competent audit work. The second remains even when an audit has been performed properly.

Where a decision depends on information that appears inconsistent, record the inconsistency as unresolved. Ask for an explanation supported by the relevant records. Do not remove the question merely because an audit report is available. Nor should a decision-maker infer misconduct from a discrepancy alone. The useful result is a supported explanation, or a clear statement that the information is not yet sufficient for the proposed use. After a forensic audit, keep unreliable evidence out of the decisions that would otherwise rely on it.

The reader's task is therefore narrower than predicting a corporate failure. Identify whether the recommendation relies on the audit opinion for a claim it actually addresses. Then identify any further claim needed to justify the commitment. The distinction also matters in financial due diligence, although that work has a different purpose and scope.

Use The Walk to connect the audit evidence to the assumptions behind the financial commitment awaiting approval. Start the Walk →

Which part of the financial decision does the opinion support?

A financial audit provides a valuable independent assessment of financial reporting. It subjects material balances and disclosures to professional examination. The FRC's explanation of financial audits describes reasonable assurance rather than absolute assurance. A clean opinion supports confidence in the financial statements. It does not remove every possibility of error.

After the report arrives, read its scope and basis before using it in an approval paper. Identify the entity and reporting period covered. Read any qualification, emphasis or relevant disclosure in context. Ask the auditor or finance team to explain wording that affects the proposal. Use the opinion within its stated scope.

The further question concerns the pending decision. A historical balance can support the starting point for a forecast. It does not, by itself, establish that a customer will pay on time. Audited profit can inform an investment proposal. It does not, by itself, establish future demand. These are possible decision assumptions, not claims about the Patisserie case.

These are categories of information, not measured shares of audit coverage. Some decision conditions may already have relevant support in the statements or audit communications. Check that support rather than assuming it is absent. Keep existing evidence and identify the remaining gap. This is part of organisational governance: the person approving the commitment must understand what makes it justified.

Ask what changed between the reporting date and the planned commitment. A later management report may update the balance, but its source and preparation still matter. The finance team can explain how current records connect to the audited statements. Keep that explanation with the proposal so the approver can see which figures come from the audit period and which depend on later information.

The boundary also keeps this task distinct from an internal audit follow-up. Here the concern is a financial-statement opinion and its relevance to one decision. Tracking remediation across processes is a different job. Resolve required audit follow-up through the proper channels while separately assessing the proposed commitment.

Match the audit evidence to the next financial decision

Use the actual approval paper as the working document. Beside each financial claim that materially affects the recommendation, record the source and date. State the assumption needed to connect it to the proposed action. Give the unresolved assumption an owner and a check before approval. Make the connection visible before signing.

The evidence check should consider both relevance and reliability. ISA (UK) 500 on audit evidence requires auditors to consider both qualities. The same distinction is useful in a decision paper, although the paper is not an audit. A reliable record from the wrong period may still be unsuitable for the claim being made.

The Universal Decision-Making Method provides five steps for this decision:

1. Frame: State the purpose of the proposed commitment and the result it must achieve. Specify who can approve it.
2. Tentative Elements: Set out the proposed amount and timing. Include a smaller commitment or delay where those are workable choices.
3. Assumptions: Identify the conditions that connect the audited figures to the proposal. Attach the evidence supporting each important condition.
4. Sufficient Certainty: Decide whether that evidence justifies proceeding, given the consequences of being wrong. Obtain more evidence where a material condition remains unresolved.
5. Implement+Monitor: Name who will check the conditions after approval. State what change will require the decision to be reviewed.

The approval record should show what would change the choice. If the commitment depends on a receipt arriving before payment, make a delay in that receipt a review signal. Set the review early enough for the approver to respond. Use the conditions of the actual proposal rather than copying a standard list.

This does not require certainty about everything in the organisation. It requires enough support for the assumptions that make this commitment sensible. The distinction helps a board decision remain clear about evidence and responsibility. A completed audit contributes important evidence. The approver still needs to explain why that evidence supports this decision now.

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Grant Purdy is the co-author, with Roger Estall, of Deciding (2020), and the architect of the Universal Decision-Making Method.