Importance of Auditing

Importance of Auditing

For Business
1. Errors are Located
Auditing is helpful for business. The error can be located through it. The location and correction of error is possible through auditing. The true and fair information about business is available.
2. Frauds are Discovered
Auditing is helpful for business. The discovery of fraud is possible through it. The guilty persons can be held responsible. The auditing accounts show fair about business.
3. Loans Become Easy
Auditing is useful for business. Lenders for granting loans accept the auditor’s accounts. The reputation of borrowers increases due to auditing. Thus auditing accounts help the businessman to expand his activities.
4. Advise about Weakness
Auditing is useful for business. The people can seek advise from auditors. The auditors are professional and they know their work very well. They can spotlight the grey area. It is the duty of the business man to act upon the advise of the auditors.
5. High Moral Values
Auditing is essential for business. There is moral check on the management and other staff. Auditing puts the pressure on the staff of work honestly. There is no pending work so there is less chance of errors and frauds.
6. Tax Payments
Auditing is useful for business, tax authority accept audited accounts for assessment of taxes. There is no further inquiry or investigation from department. The audited accounts lessen the worries of business people.
7. Tax Owners
Auditing is useful for business. The tax authorities accept audited accounts for assessment of taxes. There is no further inquiry or investigation from tax department. The audited accounts lessen the worries of business people.
For Owners
7. Efficiency Improves
Auditing is beneficial for business. The auditing determines the efficiency of employees. The training and qualifies management is an asset for any business. Such management can play dynamic role in framing and implementing the policies.
8. Dispute is Settled
Auditing is essential for business. The audited accounts are helpful to settle the disputes. The audited accounts become the basis of making decisions. The dispute may relate to infringement of patents or trademarks.
9. Planning Becomes Possible
Auditing is helpful for business. The audits accounts present true and fair view of business activities. The facts and figures can be used to prepare budge and estimates for the next years. The projected cash receipts and payments, income statement and balance sheet can be prepared.
10. Improvement of Internal Control
Auditing is helpful for business. The auditor can point out the weakness of internal control system. The business management can take steps to remove these weaknesses. The effective control systems are essential for large-scale business enterprises.
11. Fluctuation in Profits
Auditing is helpful for business. The auditor can make the detailed study to find of fluctuation in profits. There are various reasons for changes in profits. The auditor can determine the true cause of such changes.
12. High Credit Rating
The auditing is beneficial for business. The auditing accounts increase the credit standing of any business house. The lenders can rely on audited accounts for granting credit facility. In fact auditing is a screening test of business entity.
13. Listing at Stock Exchange
The auditing is beneficial for business. The listing of securities at stock exchange is optional. The public limited companies can get registration at stock exchange. Stock exchange management for registration purpose accepts the audited accounts.
14. Shareholders Protection
Auditing is beneficial for owners. The shareholders feel that their rights are protected through auditing. They can know the performance of management. Audited accounts help to determine the value of shares.
15. Partner Satisfaction
Auditing is helpful for partners. The sleeping partner feels satisfaction when there are audited. The managing partners can use business property for their personal benefit. There is moral check on managing partners.
16. Proprietors
Auditing is useful for proprietors. The audited accounts help the sole traders that their business is going on properly. The error and fraud are pointed out auditors. The owners can determine the efficiency of their employees or assistants.
17. Beneficiary
Auditing is valuable for beneficiaries. The auditor of a trust can nominate any person as trustee to look after the property of a trust. Auditing can safeguard the right of beneficiaries. There is a moral check on the trustee to follow the by – laws of trust.
18. Deceased Estate
The auditing is helpful for dependents of decreased person. The audited accounts presents true and fair view of financial statements. The family can rely on audited accounts for distributing the estate of deceased person.
19. Insolvency
The auditing is beneficial for creditors. The audited accounts show true and fair view of state of affairs of sole proprietorship or partnership. The creditor can get their money first and then owners can get refund of capital. The audited accounts help to settle the cases at an early date.
For Government
20. Better Performance of Tax Department
Auditing is beneficial for government. Tax officers accept the audited accounts. The assessment order can be issued without further clarification. There is saving of money and time due to audited accounts. The performance of tax officers is improved.
21. Exact Revenue Amount
Auditing is beneficial for government. The collection of revenue is possible at an early date. The people are allowed to deposit various kinds of taxes. The recovery of income is made at the start of the year. The government can start welfare project on the basis of total revenue collected.
22. Progress of Economy
Auditing is essential for government policies. The true fair view is stated in audited accounts. The stage of economic progress can be determined. The government can take measures to raise the rate of economic growth.
23. Purchase of Private Business
Auditing is helpful for government. The private business houses may not work in favour of general public. The government can take over such business units. The purchase price is decided on the basis of auditing of accounts.
24. Sale of Government Business
Auditing is useful for government. The policy can be framed on the basis of audition accounts. The management comes to know the value of business. The government can sell state – owned unit to private sector. The bid price is settled on audited accounts.
25. Inspectors
The auditing is helpful for government. The auditing accounts show the fair value of all assets. The value of assets. The value of assets is the basis of tax. This issue can be settle through audited accounts. The auditors are experts in their field. They know all methods of property valuation. They can issue certified the government agencies for valuation of property.
For General Public
26. Insurers can Settle Claims
Auditing is essential for insurers. The settlement of fire or marine insurance claims is easy through audited accounts. The policy holders and insurance company can settle actual loss of property.
27. No Loss to Lenders
Auditing is essential for lenders. The banks and other lenders ask the borrowers to submit audited accounts before granting loans. The audited accounts are helpful to check the trust worthiness of customers.
28. Creditor are Protected
Auditing is essential for creditors. They can know the true performance of their debtors. The creditor can accept this promise only when he feels that debtor is reliable businessman. Auditor accounts provide basic information about reliability.
29. Bidders Can Offer High Rate
Auditing is helpful for bidders. Audited accounts provide information about net worth of any business. The people interested in purchasing the business can rely on such information. They know the fair value of business. They can offer reasonable price through open bidding.
30. Better Pay to Employees
Auditing is helpful for employees. They are interests in profits. Auditing accounting prove true and fair view of profit. The employees can demand higher pay, fringe benefits and participating in profits. Audit of accounts with the independent person help the employees to make settlement with the employers.
31. Investors Can Take Decisions
Auditing is helpful for inventors. The audited accounts can be used to calculate value of shares and other securities. The bargains power is given to the people who have money and they want earn income. They can protect their rights through reliable information.