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ADVANTAGES AND DISADVANTAGES OF AUDITING

ADVANTAGES AND DISADVANTAGES OF AUDITING

The overall objective of conducting audit is to obtain reasonable assurance about whether financial statements as a whole are free from material misstatement and to express opinion on the financial statements in accordance with auditor’s findings.

ADVANTAGES AND DISADVANTAGES OF AUDITING

The chief utility of audit lies in reliable financial statements on the basis of which the state of affairs may be easy to understand. The following points highlight the other advantages and disadvantages of audit and some of these are of considerable value even to those enterprises and organization where audit is not compulsory, these are given below: –

It safeguard the interest of persons who are not associated with the management of the entity, whether they are partners or shareholders, bankers, investors etc.

It acts as a moral check on the employees from committing defalcations or embezzlement.

ADVANTAGES OF AUDITING

Auditing is considered to be the place of substantive testing and the need to be verified. It is considerable to follow the set of rules. It mentions maximum of the costs so that people can have prior intimation about the auditing. Here are some of the advantages of audit program or benefits of auditing.

Access to the capital market:

Public has to remain under the security exchanges and the requirements given under it. Once the auditing is done the accounts that are audited are easily accepted by the Government such as Central banks, public authorities. This carries greater authority standards for the account to be authorized.

Lower capital cost:

This has reduced information that is associated with the financial statements that has lower interest rates and return on their investments. Sometimes this activity provides facilitated settlements and claims of a partner. By performing the process of auditing frauds and errors can be rectified on time.

Operational improvements:

An independent auditor can be controlled and achieved operating efficiency within the client’s organization. It has influence with the staffs along with the members of the client’s organization.

Ownership:

If a public company deals with the audition, they can try to reassure the stakeholders about the accounts that are maintained properly.

Amalgamating members of the company:

The nature of each organization will be to define the goals. This amalgamation helps in uniting people to work together as a team. This combination or unity can be found during the process of auditing.

Assessing the tax:

It is the process of calculating one’s property. The person who calculates is called as assessor. This information will be recorded in local government regarding the taxes and support. It has a specialization in the preview logics that are specifically modified for the sake of insurance.

Proof can be presented:

During the audit one may collect the details from the person so as to ensure that every property has a legal proof. It helps in evaluation on further discussions. It helps in increasing the goodwill that might keep track of the collected data.

Settlement of claims:

Settlement of claims demands the enhancement and better atmosphere that are sequenced within the organization. For accessing and to influence moral values one has to restrain themselves from performing fraudulent activities.

Settlement of disputes:

The disputes between the management can be settled easily that are handled within the past accounts. This requires independent information that is enhanced with the accurate assessment of the traders. It has more constructive way of improving the efficiency of business within the management.

Reports:

It produces the report of the truth and fairness of the reported audit. It involves financial statements that are more compatible when a person goes through the documents and reports of the audit.

Maintaining reputation of the organization:

At the course of completion of an external audition, the reputation of the company is enhanced in the meanwhile ensuring the growth of the organization. It reviews the multitude of the regulations since, it maintains the reputation in the community.

Ethical behavior:

Auditing can be repeated to gain the business and its overall strategies. It devotes to the dealings in the world. This analysis and exceptions are the most ethical behavior of a company. This information about accounting and records are qualified under the procedures of the firm.

Analytical procedures:

It can neither help in prioritizing the changes and allocating them with the resources are recorded in the work papers of audits. It also involves control environment and appointment of analytical procedures of the system.

You can also read our previous posts:

1. WHAT IS GOODS AND SERVICE TAX.

2. LIST OF SERVICES EXEMPTED UNDER GST.

DISADVANTAGES OF AUDITING

The main risk in audit program is towards the assurance services that derives wrong conclusions. Assurances are to be provided within the related certification. Here are some of the limitations of an audit.

Extra cost:

Testing involves extra cost to the organization which is considered as a burden. It involves the disruptions of multiple cases. The auditor has to concentrate more even though there are disruptions. Before audit begins the auditor must get the attention of all the staff members of the organization.

Evidences:

Evidences that are identified are more pervasive than conclusive. The strength of submission of audited accounts makes major changes in the accounts of distribution of profits.

Unsuitable changes:

The rules and regulations of business may vary from time to time. It remains unstable when the program begins. It is obvious that the company’s policies may not change periodically whereas the rules and regulations may.

Chances of fraud:

Since the information delivered after audit procedure is credential then there becomes more chances of getting the situations where an individual will be forced to commit crime. It harasses the auditors to commit crime after the audit gets over.

Small concerns:

Small scale industries may usually proceed with transactions that are usually completed within the shorter period of time. Thus, auditing is not too important.

Problems in remedial measures:

Here the problem is created in remedial measures that are enhanced within the detailed interface of the data of remedial measures. These remedial measures are not included in the audit program.

If you want to share your views, feel free to mail us at info@itslyf.com

-Geetika Goyal (Team Itslyf)

ADVANTAGES AND DISADVANTAGES OF AUDITING

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