Advantages or Importance of Auditing for business, owner, and general public

1.                 For business:

a.                 Errors are located:

The errors can be located through. It the location and correction of errors is possible through auditing. The fair and true information about business is available.

b.                 Frauds are discovered:

Auditing is helpful for business. Finding of fraud is possible through it. The guilty persons can be responsible. The audited accounts show fair view about activities.

c.                  Loans become easy:

Lenders for granting loans accept the audited accounts. The reputation of borrowers increases due to auditing. Thus audited accounts help the businessman to expand his activities.

d.                 Advice about weakness:

Auditing is useful for business. The people can search advice from auditors. The auditors are professionals and they know their work very well. They can highlight the grey area. Duty of the businessman to act upon the advice of the auditor.

e.                 High moral values:

There is moral check on management and other staff. Auditing puts the pressure of the work honestly on the staff. There is no pending work so there is less chance of errors and frauds.

f.                   Tax payments:

The tax authorities accept audited accounts for assessment of taxes. There is no more investigation from tax department. The audited accounts decrease (lessen) the worries of business people.

2.                 For owners:

a.                 Efficiency improves:

The auditing determines the efficiency of employees. The qualified and trained management is an asset for any business. Such management can play active role in framing and implementing the policies.

b.                 Dispute is settled:

The audited accounts are helpful to settle the conflict. The audited accounts become the basis of making decisions. The conflict may relate to infringement of patents or trademarks.

c.                  Improvement in internal control:

The auditor can point out the weakness of internal control system. The business management can remove these weaknesses. The impressive internal control system is essential for large-scale business.

d.                 Fluctuation in profits:

The auditor can make the detailed study to find the reasons of fluctuation in profits. There are different reasons for changes in profit. The auditor can find the true cause of such changes.

e.                 Shareholders protection:

The shareholders feel that their rights are protected through auditing. They can know the performance of the management. Audited accounts help to determine the value of the shares.

f.                      Partners satisfaction:

The sleeping partners feel satisfaction when their accounts are audited. The managing partners can use business property for their personal benefit.

g.                 Properties:

Auditing is useful for proprietors. The audited accounts help the sole proprietor that their business is going properly. Auditors point out the errors and frauds. The owners can determine the efficiency of their employees or assistants.

h.                 Beneficiary:

The author of a trust can nominates any person as trustee to look after the property of a trust. Auditing can safeguard the rights of beneficiaries. There is a moral check on the trusted to follow the by-laws of trust.

i.                   Deceased estate:

The audited accounts present true and fair view of financial statements. The family can rely on audited account for distributing the estate of deceased person.

j.                   Insolvency:

The audited accounts show true and fair view of state of affairs of sole proprietorship and partnership. The creditors can get their money back first and then owners can get refund of capital. The audited accounts help to adjust the cases of any early date.

3.                 For government:

a.                 Better performance of tax department:

Tax officers accept the audited accounts. The scrutiny order can be issued without further clarification. There is saving of time and money due to audited accounts. The performance of tax officers is enhanced.

b.                 Exact revenue amount:

The collection of revenue is possible at an early date. The people are allowed to deposit different kinds of taxes. The recovery of income is made at the opening of the year. The government can start welfare projects on the basis of total revenue growth.

c.                  Progress of economy:

The true and fair view is stated in the audited accounts. The stage or phase of economic progress can be determined. The government can take measures to increase the rate of economic growth.

d.                 Purchase of private business:

The private business houses may not work in favour of general public. Such business units can take over by government. On the audited accounts basis purchase price is decided.

e.                 Sale of government business:

The policy can be framed on the basis of audited accounts. The management comes to know the value of business. The government can sell state-owned units to private sector. The bid price is settled on the basis of audited accounts.

f.                   Inspectors:

The audited accounts show fair value of all assets. The value of assets is the basis of tax. This issue can be settled through audited accounts. The auditors are experts of their field. They know all the methods of property valuation. They can issue certificate to satisfy the government agencies for valuation of property.

4.                 For general public:

a.                 Insurers can settle claims:

The statement of fire and marine insurance claims is easy through audited accounts. The policyholders and insurance company can settle actual loss of property.

b.                 Creditors are protected:

They can know the rue performance of their debtors. The creditor can accept this surety only when feels that debtor is reliable businessman. Audited accounts provide basic information about reliability.

c.                  Bidders can offer high rate:

Audited accounts provide information about net worth of any business. The people concerned in purchasing the business can trust on such information. They can offer reasonable price through open bidding.

d.                 Better pay for employees:

They are interest in profits. Audited accounts provide true and fair view of profits. The employees can demand for higher pay, fringe benefits and participation in profits. Audit of accounts by an independent person help the employees to make settlement with their employers.

e.                 Investors can take decisions:

The audited accounts can be used to calculate the value of shares and other securities. The bargain power is given to the people who have the money and they want to earn income. They can protect their rights through reliable information.

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Author : commercealls

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