Performing an Audit of the company is looked upon as an obligation and not as an opportunity, but gradually this mind-set of the people is changing. Now, if the company is going into losses or is nor performing as planned, then the first thing that the management performs is an Audit. The Financial Audit of the business helps the management in understanding the present financial status of the company and also assists in finding out ways to make the company better.
Let us understand what an audit is and how can it help the management to make the company better.
What is an Audit?
An Audit can be defined as inspection or a thorough examination of all the books of accounts of a business. The person who is checking all the books of accounts is referred to as the Auditor. One of the main reasons to conduct an audit is to find out if all the transactions and processes performed in the company are correct, and an Audit report will help devise a new future path for the company. The audit report takes assistance from various other reports and statements such as the Accounting Statement, Profit and Loss Report, Balance Sheet, etc. to provide accurate and correct financial information about the company.
How can Audit Add Value to your Business?
There are a number of ways by which Auditing of a business can help the management. Some of the reasons are described below:
1. Finds loopholes in the Business
Auditing examines all the financial condition of the company as well as all the books of records of the company to find if any illegal or wrong activity is being performed in the company. As all the activities of the company are examined, the underlying issue of the problem is revealed.
2. Improves the efficiency of Business
An audit will help the management in identifying the current as well as the potential weaknesses in the business. The identification of the problems in the company will allow the management to utilize all the resources available for use in a judicious manner and increase the efficiency and the profitability of the business.
3. Provided assurances to both Directors and Potential Investors
Conducting an Audit of the company from time to time will provide the management with the correct financial status of the company. This will allow the directors to prepare a correct roadmap for the future of the company.
Auditing will also help potential investors on two fronts. First, it will help in generating a sense of reliance as the company is audited. Secondly, it will help provide the correct financial information to all the potential investors so that these investors can make an informed decision about whether to invest their money in the company or not.
4. Increases Compliance and Reduces Fraud
The Audit Process helps to find any loopholes or if the company was not being compliant with the rules and regulation of the jurisdiction. If the company is not compliant with such regulations, then the company will face penalties that can result in the liquidation of the company. Auditing also helps in the reduction of any fraudulent activities being performed on the company premises.
5. Helps in making decisions for the Future
Analysing the various accounting books will present an accurate representation of the cash flow in the business. With all the numbers, the management will be in a better situation to provide a long term financial plan for the company. Such a plan will include better utilization of the resources.
6. Helps in the expansion of the Business
After understanding the complete financial situation of the company, the management can decide if it wants to expand the company to new markets or if it should generate new products. Any decision taken by the management should be in the good interest of both the company as well as the investors and shareholders.
These are the factors because of which Auditing is of huge importance to a company. The advantages provided by Company Audit are very beneficial, but these procedures may get complicated at times. Thus it is always recommended that a company should take professional assistance in such matters. The importance of a business audit is so great that it has been made mandatory for the Small and Medium Companies in the United Arab Emirates.
If you require assistance in matters involving Company Audit in the United Arab Emirates, then you must have a look at the service provided by JAXA Chartered Accountants. The experts at JAXA can also help in services such as Accounting, Payroll, Tax, and VAT-related services. They can also help your company to understand and prepare a report according to the Economic Substance Regulation. For more information about the services provided by JAXA, Contact Us. We will be happy to provide an answer to all your queries.