16 Dec Why are Audits important?
An audit is a review of an organization’s financial health and adherence to certain criteria. This process may be voluntary or mandatory, and can be performed at various levels, such as local, national, or international. If you’re a business owner, no doubt you’re aware of the importance of keeping accurate financial records. One of the most important steps in this process is to periodically have your accounts audited by a qualified third party. This post will give you some insight as to why audits matter and what they can help with.
In short, an audit is an inspection or evaluation by someone who has been given special authority from either a company’s management or from outside regulatory agencies. Audits are typically used to ensure that accurate records are being kept and that a company’s financial statements are being reported accurately and without any unfair bias.
An audit can have many benefits for both small businesses and larger corporations alike. While outsourcing the whole process can be time-consuming, it is also a fairly big investment of both time and money. For example, due to its complexity, a large-scale audit typically costs about $300 per hour for an auditor with 10 years of experience, according to CBS MarketWatch.In addition to being expensive, auditor fees can change from year to year. That’s why it’s important for you to use a certified accountant in order to ensure that you’re getting the best possible service from your auditing firm. In this article, we will explore the different benefits that an audit provides and discuss how having one brought up-to-date annually can help businesses protect themselves from fraud.
Improved Reputation and Trust
One of the most obvious benefits of an audit is that it can help a company’s overall image. By having your financial statements audited annually, you are showing potential investors, lenders and even your customers that you value their trust. This can have an enormous impact on your ability to secure funding and purchase goods or services.
For example, banks will much more likely approve a loan application from a business that has its financial statements audited on a regular basis. Similarly, investors will be much more likely to invest in businesses with accurate records because they have more confidence in the company’s ability to properly manage its finances.
Why audits are important
Audits are important for organizations’ accountability because they provide third party validation of the organization’s compliance with laws and regulations. They also help in our understanding of organizational management practices that affect governance and risk.
The scope of the review could cover anything from specific systems to broad topics such as environmental sustainability: everything could be in scope if it is within the auditors’ mandate and within the client’s control.
So an audit provides us with information in the form of:
- an opinion on the quality of a financial statement or system.
- information about control systems, their risks and how they work.
- a basis for improvement recommendations to the audited organization.
Typically, audits are associated with financial records and processes (internal audit) and compliance with laws, regulations and other controls (compliance audit). However, any type of “assurance engagement” might be called an audit, even though it may not involve reviewing or testing financial records or processes. For example, an external auditor may provide an IT assurance engagement to verify that appropriate controls are in place over computer systems used to prepare financial statements. The scope and depth of an IT assurance engagement, therefore, can vary widely. If you are looking for an Audit and Accountancy firm in London, visit Thakur-Chabert Limited.