We’re often asked by clients “What is the advantage of auditing?” Advantages are often missed by many business owners. Having an external auditor checking the accuracy of your management accounts and highlighting systematic errors throughout the year can identify and put an end to such mistake.
How does auditing help a business?
It brings about credibility. Having an external auditor verify your financial statements will add credibility to the company. If you’re looking to raise funds for growth or beginning to plan your exit via a business sale, having audited accounts will make it more likely that you will achieve your goals.
Improves internal systems and controls. When an auditor undertakes an audit they don’t focus solely on numbers and finances. An auditor will gain a good understanding of the enterprise which positions them to look at your business with a fresh pair of eyes. It enables them to look at business systems and processes, including accounting disciplines, and will make recommendations for changes and improvements.
An audit can identify fraud. Auditor is trained to recognise and identify fraud practices within a business.
It can identify weaknesses and risk in a business. The ability to flag weaknesses and risk in a business. And assist in taking preventative or corrective actions to reduce the business risk. An auditor brings an independent and objective commercial perspective to the business to identify flaws in contracts, over dependencies or weaknesses in systems and processes.
An audit provides a platform to make commercial decisions. Oftentimes an audit is the conduit that assists business owners to make short and long-term decisions. Whether its changes in processes, systems or controls, an audit can provide a business case for change.
It can facilitate increasing the value of your business. There are many factors that contribute to overall business value. Things such as systems and control are vital to a successful and growing company. Minimising risk in a business can add significantly to its value.
The outcome of an audit can provide shareholders confidence. If you’re one of a board of directors in a business, an external audit report is an independent review of financial statements to provide shareholders’ peace of mind and confidence that the company is being run well, and the assurance there is no occurrence of misappropriation of funds, fraud or fraudulent transactions. Some shareholders may not be involved in the day to day running of the company, in which case the audit provides an independent assurance and peace of mind
What is the impact of the audit on a company?
Virtually none, if any. Communication and planning is central in any audit. At PragmaKonsult we agree our audit process and timetable in advance and plan our work so as to address the key areas and not waste effort on unimportant matters.
We ensure clear communication of the audit approach and requirements and discuss any issues that arise as they are identified. This ensures a ‘no surprises’ approach and the timely resolution of reporting matters.
Last Word
An audit is still the best assurance, and means, for a company to obtain a professional opinion of its financial health, which is why many companies choose the voluntarily audit approach. A focused audit aims to provide peace of mind to business owners, directors, investors, and potential future buyers. It allows business owners to know that an independent auditor is doing a thorough checks on the business to minimise risk, improve systems and processes and that its accounts are in order and compliant with the Company’s Act.