Choosing to conduct an audit of your company is a very wise decision but before conducting any audit the management should have the knowledge of the different types of audit which are prevalent. A business may have an in-house auditing team or may ask an independent third party to conduct the audit of the company, as it will have no relation or interests in the business being audited. This process of getting the auditing done by an external party is termed an external audit.
Let’s have a deeper understanding of external audit and how they are beneficial for the companies.
What is an External Audit?
An external audit is the analysis and scrutiny of the books of accounts of a company which is done at regular intervals by a qualified professional. This deep study of the financial books is done with the aim of determining that the present records of the company which are accessible to the public are error-free and show correct and accurate information.
The person conducting the audit is known as the external auditor and is responsible for providing an impartial review of the company. The reports of the audit must provide a bigger picture of the business to the investors so that they can make an informed decision. The auditor also makes sure that there is no wrong or unlawful activity being conducted in the company. As the external auditor is an independent entity and does not hold any interest in the company, any of his findings or decisions will not be biased towards the company. While conducting an internal audit, the internal auditor also has similar responsibilities but is more focused on the internal procedures and the control mechanisms of the company.
Why Does a Company Require External Audit?
There are a number of benefits of conducting an external audit. The primary of these benefits is that when our company is analysed by a third party, they would provide a different perspective on the workings of our business. The various benefits which can be availed by a company by conducting an external audit are as follows:
- Provides a Different Perspective
Many companies comprise an in-house auditing team and do not take the help of an external auditor. This may seem like a feasible option but over time the mindset of the internal auditors gets limited and they lose their capability of thinking out of the box. Thus, it is always better to use external auditors as they have no relation to the company whatsoever and will not shy away from giving accurate and precise information about the workings of the company. They will also have a fresh take on the workings of the business and how to make the company better.
- Benchmarking Internal Procedures of the Company
The auditing of the internal process of the company would lead the management to set a benchmark so that the fixed quality of goods or service can be produced. Conducting an audit would give us a clear picture of our current situation. Comparing the present data with the data from the past, the management will be able to conduct a quality check of the complete audit process and ensure that only high-quality goods and services are produced.
- Ensure Compliance
An audit of the company processes will ensure that all the procedures are compliant with the rules and regulations as set by the relevant authority. This means compliance with relations to taxes, VAT, accounting, etc. If the company is not compliant with the laws of the country, it can face heavy losses in the future. It also ensures that the business is up to date with the changes and amendments in the regulations.
- Provides Credibility
This is another advantage of conducting an external audit. As the external auditor does not come under the purview of the business which is being audited, the decisions of the auditor will not be biased under any circumstance. An external audit report would enhance the credibility of the business and would provide a sense of confidence to both the shareholders and the potential investors.
- Reduce Wastage
An external audit will help to streamline all the different processes of the company and reduce both the time and resources which a company invests into these processes. Reduction of the utilization of resources and time will result in an increase in the productivity and profitability of the company.
The above mentioned are some of the many advantages that conducting an external audit offers to the companies. Not only this, an external audit can help in instigating confidence in the hearts of the investors. Conducting an external audit is preferred as it would provide a different perspective to the analysis of the workings of the company.
If you are looking for a helping hand in the matters of auditing, availing the services of “JAXA” would be a suitable option for you. Stands as one of the highly reputed audit firms in Dubai and provides various other services such as VAT, Taxation, Accounting and Payroll services, the experts at JAXA would help in the growth of your company. For more details on the services we provide do contact us, we’d be happy to help.