Conducting an audit has slowly become an essential part of the life of a company or business. Organizations all over the world conduct an audit of their business undertaking irrespective of their size or the type of industry.
One of the primary purposes of conducting an audit is to detect and prevent any wrong and illegal activity being conducted in the business. This is why conducting an audit is a lucrative option for both people in business as well as entrepreneurs.
Even though the process of auditing is very beneficial, some people consider an audit just a wastage of time and resources of the company. These people are either not fully aware of the various benefits of performing an audit or are ignorant of the various benefits a business can avail by conducting an audit.
Let us correctly understand the key benefits that auditing can provide to a business.
Advantages of Performing a Financial Audit
There are many benefits that a business entity can avail of by conducting a financial audit. The key advantages are:
If during an audit the auditor finds that the reports are not according to the rules and regulation as set by the concerned authorities of the government, he may suggest certain changes which must be followed by the management of the company. This will ensure that the company is compliant with the prescribed rules and regulations. By being compliant with the specified provisions, the Auditing process may take lesser time for the auditing party.
Helps in Insurance
While claiming insurance, the insurance company will first conduct an audit to determine the extent of damage done, and accordingly, they decide the value of the amount to be given by them. Thus an audit can help a company to come to valid insurance compensation. It can also help the insurance company to understand if the company is quoting the correct amount in damages.
Determine Profit or Loss
A Financial Audit will provide a complete summary of all the workings of the company which would be very helpful for the management of the company to define the profit or loss caused to the company by its activities. Accordingly, a businessperson would take decisions to grow and strengthen the company further.
Helps in Obtaining Loan
As the financial books have been reviewed and audited, they would project the right image of the business and thus allow banks and other financial institutions to give out loans and other financial help to the company. A company must maintain the financial records of at least the previous five years and also have the audit report for the corresponding years.
Helps during Winding Up
One of the main jobs of an auditor is to value all the assets and liabilities of the company. As a correct valuation would be present, it would be easier for the management of the company to find the right buyer for the company in case the company decides to wind up the company.
Assists in Determining the Total Tax
In a way, the tax authorities are dependent on the auditors because the profit calculated by the auditors is considered as the final one and based on this calculated profit the tax authorities assess the taxes of the company.
Help in Fraud Detection
One of the key benefits of performing an audit is to detect and prevent fraud of any kind within the organization. If any such activity is found out, an auditor will provide a suggestion as to what course of action should the company take. This is why, though an audit is not mandatory for every company, but it is highly recommended for everyone.
Helps Prepare Future Plans
An audit is conducted at regular intervals which facilitates comparison of the reports in each of the quarters. Since all the audited statements are considered correct and accurate, it would help the management to plan for the future of the business and take decisions that would allow the company to go further than its competition.
The complete and thorough check of all the transactions and books of accounts will ultimately result in the accumulation of a lot of financial data of the company by the auditor. As this data is having a basis and can be shown, in a case when an auditor is questioned upon the veracity of his findings of any malpractices in the company he can show the proof as to how did he reach his decision.
It is known that an audit would bring out even the smallest details of the company and conducting an audit means that the company has nothing to hide which is a great booster to the morale of the present stakeholders of the company. Also, it will send out a message to the potential investors that the company is clean and has nothing to hide which will ultimately boost the goodwill of the company.
The points mentioned above make it very clear that there are numerous benefits which a company can avail by conducting a financial audit of the company. Without an audit of the company, it would be very challenging to determine the exact financial picture of the company and pinpoint any flaw in the workings of the entity. As the size of the company would increase, the audit process would grow more complex. Thus, the auditing of a company should only be done by a reputed and professional auditor.
If you are searching for an audit firm in Dubai, then you must avail the services of “JAXA Chartered Accountants”. It is one of the reputed auditing firms in UAE, which would handle all the accounting and auditing functions of your business. They also provide a range of other services such as VAT services, Taxation services, Business Valuation and Restructuring and many more. For more details on the services of JAXA do contact us, we would be happy to help.