Business auditing is evaluation and examination of the company’s financial statements to ensure the records are accurate and transparent. Auditing is done internally by the corporation’s employees, or the company may opt to look for an external audit firm at a fee. Business Auditing is a vital requirement in a multinational company, medium or a small business. For every business to be successful, there must be transparency in all activities within the enterprise. All stakeholders must be made aware of how the business operates. It is important to have annual independent audits in all the sectors of the company.
Business auditing is something required by law in every country. Governments have their chief auditors who do auditing of the taxpayer’s money in all public institutions. Auditors operate under international standards which give guidelines to ensure there are consistency and accuracy. The reports are submitted semi-annually or annually where there is cross checking the organization records collected from various sources. Some of the benefits of having regular auditing in a business:
Business objectives. When the company has an effective audit system, it helps it to attain its set goals and objectives without delays. Business auditing facilitates supervision and monitoring and prevents any irregular transaction within the company. Business records help in making decisions and help the future preparations for a business success. Internal auditors review the daily activities of the company and give recommendations to the management for corrections and improvements.
Fraud prevention. Business audit helps in prevention of any plan of fraud within the company. Recurring analysis of company’s operations contributes to detecting any program of fraud and any other accounting irregularities. By having an active and systematic audit system within a business, it helps to prevent any employee’s plan to deceit. Audit professionals assist in the modification of internal control system of the company thus making difficult for any fraud plan to be successful.
The cost of capital. This is the opportunity cost of introducing a specific investment. It is the rate of return that is expected by putting a same amount of money into another investment with equal risk. The cost of capital is very crucial to any business be it small or a big one. Every investor’s aim is to earn and maximize the profit margin as much as he can in his business. Secure audit system helps the investor to reduce the risk in the business by providing professional advises and recommendations. The audit system reduces the risk of fraud, misappropriation of funds and risk of sub-optimal management which occurs due to inadequate information of the business.
The risk of misstatement. Many businesses collapse due to poor record keeping and having untrue financial statements. Auditors help the company to assess the risk of material misstatement in the company’s financial system by creating reliable account reports. This helps the company to be able to allocate its resources on product lines which are profitable. Audit reports help the business to manage the status of its assets and liabilities for the purpose of consistency in producing goods and services. A good audit system prevents misstatement in company’s records and reports.
Verification. Accurate financial statements and proper record keeping are used in various business deals like borrowing a business loan from a bank. The records from an audit firm are also utilized in the business sale where the buyer verifies the company asset and liability status as presented by independent audit company.
Conclusively, for every business to be successful, there must be contingent bookkeeping and financial statements. This helps in decision making by the company management team. Accurate information about the company helps in planning for the future business operations. The audit reports assist the company in making business deals with other companies. Successful companies organize for annual general meetings to share the audit report with the entire shareholders.