Advantages of Auditing Services in India
Audit is the examination or inspection of various books of accounts by an auditor followed by physical checking of inventory to make sure that all departments are following documented system of recording transactions. It is done to ascertain the accuracy of financial statements provided by the organisation. It is an important process to the company itself, the government, the investors, creditors, shareholder etc.
Offers Assurance to the Owners
With the help of auditing the users of financial statement like the owners, investors, shareholders etc. are assured with respect to the accuracy of their books of accounts.
This helps the users to make financial decisions in the audited entity as they are informed regarding the overall efficiency and profitability of their business operations.
Advantage to the Stakeholders
The stakeholders like creditors, banks, debenture holders, security holders, etc can decide the degree of reliance to be placed on the books of accounts.
Also, the audited financial statements are considered to be more credible than unaudited financial statements.
Helps in Detecting Errors and Frauds
The financial statements can be misstated either due to fraud or error. The distinguishing factor between the two is whether the misstatement is intentional or unintentional.
An error is something that is done without the intention to misstate the books of account of the company, it is an innocent mistake. Fraud, on the other hand, is intentional, and is done to gain an unjust or illegal advantage.
During the process of auditing, both errors and frauds are discovered. Auditing also helps prevent such errors and frauds.
Improving Efficiency of Business
It enables the auditor to give constructive advice to management on improving the efficiency of the business.
It also provides assurance that statutory responsibilities concerning the accounts have been complied with and there are no cases of non-compliance with applicable laws and regulations.
Useful in Detecting Unanticipated Risks
Audit planning is an important part of the auditing process. It plays a significant role in finding unanticipated risks or opportunities as compared with the planned activities.
Compliance with Accounting Standards
Auditors in addition to accuracy of the information contained in the financial statements, also check if the financial statements are prepared and presented in accordance with the international accounting standards and national standards also.
It is very important in case of multinational corporations, as it is mandatory for them to comply with the standards on accounting. Audited financial statements are also checked for consistency to ensure that the accounting methods are followed properly and figures used within a company are not only correct but also follow a regular and uniform reporting methodology.
Reliability of Financial Statements
An independent audit enhances the reliability of the financial statements as the auditor is independent of the entity being audited. The concept of independence increases the reliability of the examination and hence of the financial statements as a whole.
It also provides a moral check on the employees and staff and prevents embezzling of assets.
Ensures Accuracy of Books of Accounts
Auditing conducts a detailed and independent examination of all accounting books of an organization. It ensures regarding the accuracy of financial information and the compliance with the applicable statutory requirements.
Help in Maintaining Accounts Consistently
It keeps check on the regularity and uniformity of financial statements and helps in taking corrective actions if they are not maintained in an adequate manner.
Assists in Decision Making
Audited financial statements helps in decision making as well. Auditing is done by various experts of account, law and finance who have detailed theoretical as well as practical knowledge of various subjects, so they provide advice with respect to resolving of problems arising in financial reporting.
Moral Check on the Employees
It acts as a moral check on the staff and employees of the company so that the risk of fraud due to stealing or fraudulent activities through employees is reduced. The process of auditing keeps employees constantly under scrutiny that the accounts are being audited. Any irregularities can be identified during such an examination. This helps the staff in being honest and responsible and prevents them from committing dishonest and fraudulent acts.
Easy Procurement of Loans
The audited financial statements provide more credibility regarding the financial position of the entity rather than unaudited financial statements.
It is easier to avail loans from financial institutions on the basis of audited financial statements.
Valuable Suggestions
Audit will help the auditor to understand the technicalities and specifications of business. This will help the auditor to make suggestions for the improvement of business to help it conducts operations in more efficient manner and can reduce the overall risks to an acceptably low level.