The main advantages of auditing is Audited financial statements are accepted by Government authorities like Tax authorities, Central banks, regulatory bodies, financing agencies etc. Audit report helps to know the financial position of the business firms and its growth position also. Audited financial statements present the real position of the company before the general public. Keeping in view the position of a company one can do the investment for receiving good return.
Important Advantages of Auditing
Advantages of auditing includes In the company of audit, the public in all-purpose and the interested persons of the business in exacting receive the statement of accounts, representing the true financial position of the concern and they can collect result from it. To conduct auditing the accounts Errors and frauds can be prevented and detected in correct time.
For availing loan finance from financial institutions or others, previous years audited accounts are evaluated for determining repayment capability. Regular audit of account create fear among the employees in the accounts department and exercise a great moral influence on clients staff thereby restraining them from commit frauds and errors. Auditing techniques such as verification, vouching of cash, assets, stock, and other payments etc. act as a moral check on the employees, this forces them to keep the accounts up-to-date and free from errors and frauds. Audit acts as a check on employees and it saves the owner from losses. In case of partnership firms audited accounts facilitate settlement of claims on the retirement/death of a partner. In case of insurance and participation of fraud claims can be settled on the basis of audited accounts of the previous years.
In case of Public Company where ownership is separated from management, auditing of accounts reassure the shareholders that accounts have been properly maintained, funds are utilized for the right purpose and the management have not taken any undue advantage of their position. Value of shares is also increases by proper accounts.
Advantages of auditing includes, To determine the value of the business in the event of purchase or sales of the business, audited account will be the treated as the base for the evaluation.
Another advantages of auditing is the audit of accounts by a qualified auditor also help the management to understand the financial position of the business and also it will help the management to take decision on various matters like report in accounting system and internal control system of the organization or setting up of an internal audit department etc.
If the accounts have been audited by an independent person, disputes between the management and labour unions on payment of bonus and higher wages can be settled to them. In the event of admission of a new partner, audited accounts will facilitate the formation of terms and conditions for joining the new partner. Last years audited accounts will give a general idea about the growth and financial position of the business to the new partner.
Economic conditions of various companies can be judged through their audited accounts. If these companies are improving their economic condition. The audited final accounts should be prepared as per the rules and guidelines laid down by statute. An audit provides an assurance to the investors, government, lenders, creditors, owners, management etc. That the final account presented shows the true and fair picture of the profit and losses and financial position of the concern, firm growth in the past period for further future decisions. These are the main advantages of auditing.
Here with I given a external useful link related to this topic: http://en.wikipedia.org/wiki/Computer-aided_audit_tools