ADVANTAGES TO BUSINESS
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.
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.
