By Rhiannon Cole, published 14 December 2025
Understanding business goes beyond a technical knowledge of accounting standards or tax legislation; it involves appreciating how an organisation actually operates, competes and creates value. For accounting, audit and tax professionals, this means understanding revenue models, cost structures, strategic objectives and the economic and regulatory environment in which the business operates. Financial information does not exist in isolation - it reflects real commercial decisions, market pressures and operational realities. When professionals understand this wider context, they can interpret financial information with insight rather than applying rules in a purely mechanical way.
In accounting, a strong understanding of the business supports sound professional judgement and higher-quality financial reporting. For example, an accountant working in a manufacturing business who understands production cycles, capacity constraints and demand fluctuations is better placed to assess inventory valuation and impairment accurately. Similarly, in a fast-growing technology company using subscription-based revenues, an accountant who understands customer churn, contract terms and growth strategy can apply revenue recognition requirements correctly and clearly explain movements in deferred income. In both cases, business understanding ensures the financial statements reflect economic reality as well as technical compliance.
For auditors, understanding the business is fundamental to identifying and responding to risk. Consider an audit of a retail company that has expanded rapidly into online sales. An auditor who understands e-commerce operations, logistics and digital payment systems will focus attention on revenue recognition, returns, fraud risk and IT controls, rather than treating all revenue streams as low risk. This approach underpins modern risk-based auditing and has been successfully used to improve audit efficiency, strengthen professional scepticism and reduce the likelihood of undetected material misstatements.
Tax professionals also depend on business understanding to provide effective and sustainable advice. For instance, when advising a multinational group on supply-chain or transfer pricing arrangements, a tax specialist must understand where value is created, how decisions are made and how risks are managed across the organisation. Aligning tax positions with genuine commercial activity makes those positions more robust and defensible in discussions with tax authorities in both the UK and the USA. In practice, firms that integrate tax planning with a deep understanding of business operations achieve stronger compliance, lower dispute risk and greater strategic value for their clients.
