What is the Importance of an External Audit for a Business?
02

Feb 2021

The importance of an Audit for a company is known to everyone. The Financial Audit will not only help the company in understanding the inner working of the company and enhancing the profitability but will also help in the development of a future path for the business. This will in turn help the company to enhance its growth, increase goodwill and will also help in the proper allocation of the resources of the company.

There are two different types of Financial Audit of a company which can be conducted by the management so that they can check the current workings and profitability of a company, namely Internal Audit and External Audit.

To know more about types of an audit performed by Dubai Organisations, check out our blog ‘Types of Audit performed in the Dubai Organization.’ In this blog we will be talking about External Audit and how is it important for a company.

An external Audit is the financial audit of the company which is conducted by a third party. This third party has no affiliations with the company. This will ensure that the auditor has no bias towards the company and will be able to perform the financial audit of the company in an impartial manner.

Importance of External Audit for a Company

There are many different advantages of conducting an External Audit of a business. The importance of External Audit for a company has been mentioned below:

  1. Independent Assessment of the Company provides Increased Credibility

As the audit is performed by an independent third party, there is no bias of the auditor towards the company. This means that the audit report will consist only of the correct facts and figures about the company. This will help in getting hold of and curbing any fraudulent business activity which is being conducted in the company and will also help increase profitability.

  1. Evaluation of the Internal Processes of the Company

As the internal auditor is a part of the company, he cannot openly evaluate and the internal workings of the business. An external auditor has a better chance to adequately evaluate all the internal workings of the business and provide a truthful assessment of them. This will help the management in creating new and better strategies for the future and will also enhance the efficiency of the business.

  1. Better Quality of Audit

Many of the internal auditors may not be well versed with the current changes in the business environment and can leave essential information out of the auditing report. The internal auditor is also very close to the business working and can also leave out certain information intentionally, which can affect the profitability of the business. Such instances are not possible if an external auditor is hired to conduct the auditing of a business. 

  1. Provides Confidence to Current and Prospective Shareholders

By hiring an external auditor, the company strives to provide correct and accurate information to the management as well as the shareholders of the company. This will be very helpful to the shareholders, and they will be able to take a calculated and informed decision. It will also ensure that the company will keep the best interest of the shareholders in mind while taking any business decision.

With such advantages of the external audit, the utilization of such a service is a no brainer for businesses. But the management of the business should think long and hard before choosing between any type of audit as both internal and external audit have their own pros and cons. They should also avail themselves the External Auditing services from a reputed and professional source which will provide them with the best services possible.

To know about the differences between External and Internal Audit, you can go read our blog ‘Difference between Internal and External Audit ‘.

In today’s world, choosing a financial firm that will conduct a reliable and unbiased audit of the company is very important for the company. External auditors will provide valuable and informative insights into the management of the company and will help your company to become more profitable and efficient.

If you require help in deciding the type of auditing services which will be utilized for your business or any other help regarding the financial aspect of the company in the UAE, then JAXA Chartered Accountants can be of assistance to you.

The professionals at JAXA will analyse all the financials of the company and will accordingly provide you with a quick and customized solution for your problem. There are various other services provided by JAXA Chartered Accountants such as Accounting Services, Auditing Services, VAT and Tax-Related Services and many others. The experts at JAXA Chartered Accountants will ensure that the best quality services are provided to the business. For more information about the various services provided by JAXA, Contact Us. We will be happy to help. 

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Reasons why External Audit is important to a Business

What are the Objectives of an External Audit?

4 Pre-Requisites of an External Audit

5 Tips to Consider While Conducting the First External Audit

Importance of Data Analytics for Conducting External Audit