For organisations in healthcare and life sciences, financial audits are more than a compliance exercise. They’re an opportunity to strengthen internal processes, build trust with stakeholders, and navigate the complexities of a rapidly evolving industry. Here, we address why having an audit is crucial and how your organisation can benefit.
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Why should healthcare and life sciences organisations prioritise having a financial audit?
Audits provide transparency and assurance. They validate the accuracy of financial statements, reassure investors and stakeholders, and ensure compliance with industry-specific regulations. For healthcare and life sciences organisations, audits also address unique challenges such as revenue recognition for complex pricing models and the valuation of intellectual property.
When is a financial audit legally required for healthcare and life sciences organisations?
An audit is typically required if your organisation exceeds statutory thresholds or operates in jurisdictions with mandatory audit requirements. For example, regulatory bodies often mandate audits for entities engaged in clinical trials or those receiving public funding
Even if an audit is not legally mandated, many organisations in these sectors opt for one to meet investor or stakeholder expectations and to support strategic decisions.
What challenges might healthcare and life sciences organisations face during an audit?
Key challenges include:
- Revenue recognition complexities such as managing subscription-based pricing, milestone payments, and tiered revenue structures
- Regulatory compliance requirements that may include standards like IFRS 15 which governs revenue reporting and disclosures
- Accurately valuing intangible assets such as intellectual property, patents, and goodwill
- Tracking financial implications of changes to supplier or clinical trial agreements
Experienced auditors familiar with the healthcare and life sciences sectors can help organisations address these issues effectively.
How can healthcare and life sciences organisations prepare for an audit?
Preparation is crucial for a smooth and effective audit. Steps include:
- Organising financial records to ensure all contracts, invoices, and R&D expenses are complete and accessible
- Strengthening internal controls to reduce the risk of errors in financial reporting
- Understanding key regulations to determine how they apply to your organisation’s contracts and revenue streams
- Communicating early with auditors to highlight any unique challenges or complex arrangements
What are the benefits of having an audit, even if it’s not required?
Audits can deliver significant strategic advantages, including:
- Enhanced credibility, giving stakeholders confidence in your financial health and governance
- Operational insights, as auditors often identify inefficiencies and provide recommendations for improvement
- Better preparedness for growth, positioning your organisation for funding opportunities, mergers, or acquisitions
What common pitfalls should healthcare and life sciences organisations avoid during an audit?
Common pitfalls include disorganised records, which can delay the audit and increase costs, and inconsistent reporting, which can invite additional scrutiny if it doesn’t align with relevant standards. Proactive preparation and collaboration with auditors can mitigate these risks.
Why do stakeholders value audited financial statements?
Audited financial statements provide independent assurance of an organisation’s financial integrity. For investors, regulators, and collaborators, they’re a mark of credibility and professionalism. In the healthcare and life sciences sectors, where precision and reliability are paramount, an audit can be the difference between securing critical funding or losing stakeholder trust.
Final thoughts
For healthcare and life sciences organisations, having a financial audit is not just about meeting regulatory requirements. It’s a chance to refine financial practices, ensure compliance, and build a foundation for sustainable growth. By engaging experienced auditors who understand the nuances of your sector, you can turn the audit process into a strategic advantage.
If your organisation is considering an audit, Gravita’s healthcare and life sciences specialists are here to help.
