What Are Advantages Of Audit To Business Sector?


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Anonymous Profile
Anonymous answered

Advantages of audit for the business are:

1.   Satisfaction of Owner

It is because of audit that the owner will be satisfied about the business operations and working of its various departments.

2. Detection and Prevention of Errors

The errors whether committed innocently or deliberately are discovered by the process of audit and its presence prevents their occurrence in the future. No one will try to commit an error or fraud as the accounts are subject to audit and hence they will have a fear of being detected.

3.     Verification of Books

Another advantage of audit is the verification. Of the books of accounts, which helps in maintaining the records up to date at all times.

4.     Independent Opinion  

Auditing is very useful in obtaining the independent opinion of the auditor about business condition. If the accounts are audited by an independent auditor, the report of the auditor will be true and fair in all respects and it will be of extreme importance for the management of the company.

5.     Detection and Prevention of Frauds

Just like errors, frauds are discovered by audit and its presence minimizes future possibility if not eliminated totally.

6.     Moral Check

The process of audit will establish a check on the minds of the staff working in the business and they will not be able to commit any irregularity, as they will have a fear and will also be aware that the accounts will be examined in the near future and that action would be taken against them if any irregularity is discovered. Thus the audit prevents the happening of any irregularity before it starts and the staff hence becomes more active and responsible. The fear of their getting caught act as a moral check on the staff of the company.

7.     Protection of the Rights and Interests of Shareholders

Audit helps in protecting the interests of shareholders in case of joint stock company. Audit gives assurance to the shareholders that the accounts of the company are being maintained properly and their interest will not suffer under any circumstances.

8.     Reliance by Outsiders  

Outsiders like creditors, debenture holders and banks etc. Will rely on the business accounts if they are audited by an independent authority (external auditor).

9.     Loan Facility

Money can be borrowed easily on the basis of audited balance sheet from financial institutions. If accounts are audited the true picture will be visible to banks and it will be easy for them to issue loans as early as possible.

10.  Easy Valuation

It becomes easier to evaluate property etc. If the accounts are audited when the business is disposed off and as a result no dispute whatsoever will arise.

11.  Upto Date Record

Due to the fear of audit the work of accounting always remains upto date and correct in all respects.

12.  Reliance by Partners

If a new partner is to be inducted in the business, the audited balance sheet will be a good base to estimate the value of good will. Moreover, the audited accounts of a company by an independent person will minimize the chances of misunderstanding among the partners.

13.  Reliance by Shareholders

In case of joint stock company, the shareholders have no hand in the actual running of the business because the management was in the hands of the directors. So the shareholders are assured in the presence of the process of audit that the directors have not taken any undue advantage of their status and position.
Amen Bukhari Profile
Amen Bukhari answered
Audit has given many advantages to different classes. The errors whether by committed innocently or deliberately (intentionally) are discover by the audit and its presence prevents their occurrence in future because errors are located at an early stage and no attempt is made to commit such errors and mistakes. Just like errors, the frauds are discovered by audit and its presence minimizes their future possibility if not eliminated.

If the accounts are got audited, the proprietor of the business concern may have independent opinion on the accounts examined by the auditor. Thus the auditors report will serve a great help to the proprietors over unsatisfactory matters mentioned and proprietor would be very vigilant about those matters in future. The auditing of accounts keeps the accounts clerks regular and vigilant.

They know that the auditor would complain against them if the accounts are not prepared up to date. In presence of audit, the proprietor will be satisfied about the business operation and working otherwise it would have not so, if the audit would have not been there.The outsider like banks and tax authorities will rely upon the business accounts, if they are audited, otherwise not.

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