This is the Purpose and Benefits of an Audit for Your Company
Corporate Secretary Service Indonesia – The benefits of an audit are not only to help present more accurate financial statements, but can also help find if there is fraud or actions that can harm the company’s finances. Then, what are the benefits of an audit & review for a company? Check out the full discussion in this article.
Definition of Audit & Review
Quoting Wikipedia, an audit is a process of collecting and examining evidence about information in order to determine and make reports regarding the level of conformity between information and specified criteria. Another definition, audit is an evaluation of the financial statements of a business that is carried out independently and objectively. The definition of an audit from other sources is an examination that is carried out critically and systematically, independently of the financial statements that have been prepared by management and accompanied by accounting records and supporting evidence.
The audit process must be carried out by competent and independent people, and follow established auditing standards. Those who do so are referred to as auditors. In conclusion, an audit is a process of examining financial statements that is carried out systematically and independently, along with supporting evidence.
Purpose and Benefits of an Audit
Basically, an audit aims to make the company better in the future. The purpose of a company doing it is to check the completeness, accuracy, existence, assessment, classification, fixity,cut off and disclosure of the company itself. While the benefit of an audit is to increase the integrity of financial statements that can be trusted for the benefit of external parties, such as shareholders, government, creditors, and others.
Audit actions can also prevent fraud that can be committed by company management. Audits are beneficial not only for the company being audited, but also for other parties. What is the impact of these benefits?
1. Benefits for the Audited Party
As mentioned above, an audit can increase the integrity of financial statements so that they can be trusted for the benefit of external parties. Audits can also prevent fraud or discover fraud committed by the company’s internal parties.
Read Also: The Importance of Accounting Services for Company Financial Management
In addition, audits provide a more reliable basis for the preparation of tax returns submitted to the government. Audits also help open the door to external sources of financing, and can help uncover errors and omissions in financial records.
2. Audit Benefits for Other Parties in the Business World
Other parties in the business world, referred to here are company employees or creditors. Audits can provide a more convincing basis for partners and creditors to make decisions in granting business credit. Not only that, audits also help provide a more convincing basis for insurance companies to settle insured losses.
Audit & review can also provide investors and potential investors with a reliable basis for assessing investment performance and management stewardship. Another benefit is that audits can provide labor unions and audited companies with an objective basis for resolving disputes over wages and benefits.
In business transactions, an audit can provide buyers and sellers with an independent basis for determining the terms of a sale, purchase, or merger. To customers or clients, an audit can provide a better basis for assessing profitability or financial audits, management audits, internal control systems, company profitability, operational efficiency and financial condition.
3. Benefits to the Government or Other Parties
Audits can provide additional independent assurance regarding the accuracy of financial reporting as a basis for taxation. Not only that, audits are useful as an independent basis for other parties in the legal field to resolve problems in bankruptcy, administer inheritance and trust assets, and determine the proper execution of partnership agreements.
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