The benefits of an audit to any business are numerous since it seeks to give the true and fair view of the financial statements and operations of the subject entity.
Independent opinion: Audit being an independent exercise conducted by a third party who has no interest in the company, has an assurance for true and fair opinion in regard to the position of the business. An external auditor will, therefore, give an independent opinion.
Detect and identify fraud: Audit involves a close examination of relevant and critical financial documents in the business; it is possible to uncover any malpractices or fraudulent activities within the business. Audit thus evaluates the company’s level of compliance to the external and internal regulations. The audit, therefore, serves as a moral check for the company.
Source of information for potential investors: Audited reports give the actual state of the business: The audit results usually give the outside world a deeper and clear understanding of the company’s financial records. This information affects the credibility of the company before the potential investors who could have an intention of investing in the company. The potential investors can make reliable and informed decisions on which company to invest in as well as the amounts to invest.
A test and proof for credit worthiness: Audit results can also be used by creditors and other lenders to determine the credit worthiness of a company. Money lenders want reliable information about the ability of the company to pay back the monies borrowed and any interests accrued. Such information can be obtained from the audited results. Generally, the lender wants to evaluate hoe safe their money is in the hands of the borrower.
Evaluation and reinforcement of internal controls: An audit practice also seeks to identify the weak lines in the internal controls of a company. The identification of such shortcomings is usually accompanied by recommendations to eradicate them. An audit, in this case, serves as a reliable contributor to the establishment of stronger internal controls of a business.
Compliance to accounting standards: An audit also helps to identify weaknesses in the accounting systems and practices of a business and propose the appropriate improvements on the same.
It also detects and prevents errors: Continuous and regular audits help a company identify any mistakes (financial and non-financial) and lay down measures to prevent reoccurrence of such.
Satisfaction of owners: It is only through an audit that the proprietors (directors who are not directly involved in the daily operations) of a company can get an assurance/fulfillment that the company’s operations are being run efficiently.
An audit is a sufficient defender and protector of the shareholders investments. The shareholders are assured that their interests are well preserved at all times.
Audit serves to evaluate the risks and economy of the company. By identifying the loopholes in the accounting systems and internal controls, an audit can usually predict the risks and prevalence of the company to the same.
Continuity of the business is guaranteed by audit because the audit results are usually gauged against those of the previous periods so as to identify the areas that need intervention to ensure operational efficiency of the company and hence create a favorable environment for the achievement of the company’s goals.