We’ve all heard about auditing but what does it really entail? As per definition it has been referred to as the unbiased examination and evaluation of the financial statements and operations of an organization which can be performed by internal employees or by an external entity such as an audit firm. What makes it an important aspect in business then? Let’s try discussing its long list of benefits and importance in brief:
- PREVENTION AND DETECTION OF FRAUD. The procedures performed in an audit helps businesses detect any anomalies, fraudulence and small and big time theft within the organization. In the same manner, because of this employees and staff are less likely to attempt one knowing that the organization has eyes set to look after everyone.
- DETECTION OF ERRORS. Sometimes employees commit mistakes unconsciously without any intention to do so. Human error is always a risk that can never be fully diminished. No one’s perfect after all. With an audit performed, companies get to track down errors committed and apply the needed corrections to set things straight and on track again.
- ASCERTAIN COMPLIANCE OF TAX LIABILITIES. It also enables organizations to make sure that the taxes they remit and declare are the correct and actual amounts. We all know that the penalties and legal consequences of non-compliance can be a pain and not to mention expensive. It helps to have people who can make assessments of the company’s ability to fulfil its tax obligations.
- MAKES WAY FOR IMPROVEMENT. With errors corrected, fraud eliminated, advices provided and efficiency upheld; businesses make way for improvement. It is important for entrepreneurs to remember that they should constantly improve themselves, their employees and their company as a whole if they want to stay afloat in the market.
- ENSURES EFFICIENT, EFFECTIVE AND TRUSTWORTHY STAFF. With someone to check up on their work and to ascertain that policies, standards and procedures are intact and followed as should be, employees will be pushed to constantly do their best, improve their skills, work as should be and stay honest in all matters.
- IMPROVE INTERNAL CONTROLS. In most cases, companies already have internal controls put in place. However, this does not guarantee that it is working and that people are following it. There are cases when the said controls fail to do what they are expected to do. Auditing allows companies to review and assess whether another line of control should be added, removed, scraped off or changed.