Advantages of Auditing audit
Advantages of Auditing
It is compulsory for all the organizations registered under the companies act must be audited. There are advantages in auditing the accounts even when there is no legal obligation for doing so. Some of the advantages are listed below:
1. Audited accounts are readily accepted in Government authorities like income Tax Dept., Sales Tax dept., Land Revenue departments, banks etc.
2. By auditing the accounts Errors and frauds can be detected and rectified in time.
3. Audited accounts carry greater authority than the accounts which have not been audited.
4. For obtaining loan from financial institutions like Banks, LIC, HUDCO, HDFC, IFCI etc., previous years audited accounts evaluated for determining the capability of returning the loan.
5. 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.
6. Audited accounts facilitate settlement of claims on the retirement/death of a partner.
7. In the event of loss of property by fire or on happening of the event insured against, Audited accounts help in the early settlement of claims from the insurance company.
8. In case of joint Stock Company where ownership is separated from management, audit of accounts ensure 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.
9. 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.
10. 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 internal control system of the organization or setting up of an internal audit department etc.
11. If the accounts have been audited by an independent person, disputes between the management and labor unions on payment of bonus and higher wages can be settled amicably.
12. 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 3 years audited accounts and balance sheet will give a general idea about the growth and financial position of the business to the new partner.
- Definition of Auditing
The word 'Audit' is originated from the Latin word 'audire' which means 'to hear'. In the earlier days, whenever there is suspected fraud in a business organization, the owner of the business...
- origin of auditing
From the time of ancient Egyptians, Greeks and Romans, the practice of auditing the accounts of public institutions existed. Checking clerks were appointed in those days to check the public accounts. To...
- Objectives of Audit
For a better understanding we could classify the objective of audit as: 1. Primary Objectives 2. Secondary Objectives. Primary Objectives: To determine and judge the reliability of the financial...
More by this Author
The word 'Audit' is originated from the Latin word 'audire' which means 'to hear'. In the earlier days, whenever there is suspected fraud in a business organization, the owner of the business would appoint a...
For a better understanding we could classify the objective of audit as: 1. Primary Objectives 2. Secondary Objectives. Primary Objectives: To determine and judge the reliability of the financial statement...
Learn about the various methods and types of costing.