28
Sep 2021
One of the best ways to examine and evaluate the various activities of the business is to conduct a financial audit of the company. The financial audit can provide us with an in-depth account of the present status of the company and will also provide details about the potential problems which the business can face. This will prepare the management to combat such a situation.
What is a Financial Audit?
A financial audit can be defined as the examination of all the books of accounts of the business. This includes the various business documents, company invoices and the data accumulated via the help of auditing software. The primary goal of a financial audit is to provide the correct and accurate status of the business. This will allow the management to plan ahead of the situation and will also assist in the judicious use of resources.
A business can choose between both Internal Audit and External Audit. Sometimes the government mandates the audit of a company. This type of audit is known as the Statutory Audit of the company.
How does Financial Audit assist in Business?
There are a number of benefits that the Financial Audit will provide to a business. The advantages are explained below:
- Helps in identifying potential problems in the Company
Auditing will allow the management to find out the potential problems which the company can face. After the audit is conducted, the management can take the required steps to tackle and eliminate such problems. The problem could be either in the method of accounting or the taste and preferences of people have changed. The audit will help the management prepare for such changed.
- Allows judicious utilization of resources
Every business requires some kind of resource to function but this resource can be wasted which can cause the profitability of the company to go down. The audit will help in allocating the resource properly to the relevant business activity. This will help in increasing the profitability of the business.
- Improves the Accounting practices which are being used
Sometimes the business is unable to reach its maximum potential because of a wrong accounting method being followed by the management. The audit of the company will help to discover if the correct accounting system is being followed by the management or not. If not the auditor can recommend a correct method of accounting that will be more profitable for the business.
- Helps in the development of a Future Plan
Planning ahead is very important for a business. It helps in preparing the company for any future situation which may hinder the development and growth of the business. Auditing can help the management make plans to tackle such future situations and increase the revenue of the business.
- Assists in uncovering fraudulent activities in the business
It is common to have fraudulent activities within the business. This not only decreases the profitability and revenue of the business but also affects the goodwill of the company. An audit will help in minimizing or eliminating this fraudulent activity which will, in turn, increase the profits of the company.
- Maintaining Compliance requirements
The auditors will examine all the financial records of the business and will be able to check if all the required compliance requirements are being followed by the company or not. The compliance requirements must be fulfilled by all the businesses else they may have to face various problems in the future.
- Quality of Information flow from the Company to the investors
The quality of information which flows from the management of the company to the investors is very important in deciding if the people want to invest in the company. The better the quality of information flow, the more investors the company can get. As the auditor will have access to the data of the company it will be able to provide the required data to the investors in the form of an audit report.
These are the various ways in which the financial audit of the business can assist a business. It is important for a business to take the assistance of reputed and professional auditing services so that the business can make use of all the resources at hand.
If you are looking for auditing services for your company in the United Arb Emirates then do have a look at the services provided by JAXA Chartered Accountants. Feel free to Contact Us. We will be happy to assist you in your business journey.