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Advantages of Auditing or Audit

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Helna is a postgraduate in Commerce who now working as a Manager and also love sharing informative information with her readers.

By auditing the accounts errors and frauds can be detected and rectified in time.

By auditing the accounts errors and frauds can be detected and rectified in time.

Advantages of Auditing

Advantages of Auditing

It is compulsory for all the organizations registered under the companies act must be audited. There are advantages in auditing the accounts, even when there is no legal obligation for doing so. Some of the advantages are listed below:

1. Audited accounts are readily accepted in Government authorities like Income Tax Dept., Sales Tax dept., Land Revenue departments, banks, etc.

2. By auditing the accounts errors and frauds can be detected and rectified in time.

3. Audited accounts carry greater authority than the accounts which have not been audited.

4. For obtaining a loan from financial institutions like Banks, LIC, HUDCO, HDFC, IFCI, etc., previous years' audited accounts evaluated for determining the capability of returning the loan.

5. A regular audit of account creates fear among the employees in the accounts department and exercises a great moral influence on clients' staff, thereby restraining them from committing fraud and errors.

6. Audited accounts facilitate settlement of claims on the retirement/death of a partner.

7. In the event of loss of property by fire or on happening of the event insured against, Audited accounts help in the early settlement of claims from the insurance company.

8. In the case of a Joint Stock Company where ownership is separated from management, an audit of accounts ensures the shareholders that accounts have been properly maintained, funds are utilized for the right purpose and the management have not taken any undue advantage of their position.

9. To determine the value of the business in the event of purchase or sales of the business the audited account will be then treated as the base for the evaluation.

10. The audit of accounts by a qualified auditor also help the management to understand the financial position of the business and it will help the management to take the decision on various matters like report in an internal control system of the organization or setting up of an internal audit department, etc.

11. If the accounts have been audited by an independent person, disputes between the management and labor unions on payment of bonuses and higher wages can be settled amicably.

12. In the event of the admission of a new partner, audited accounts will facilitate the formation of terms and conditions for joining the new partner. The last 3 years of audited accounts and balance sheet will give a general idea about the growth and financial position of the business to the new partner.

Related links

  • Definition of Auditing
    The word  'Audit' is originated from the Latin word 'audire' which means 'to hear'.  In the earlier days, whenever there is suspected fraud in a business organization, the owner of the business would appoint a person to check the accounts.
  • Origin of Auditing and Oregin of Audit
    From the time of ancient Egyptians, Greeks, and Romans, the practice of auditing the accounts of public institutions existed. Checking clerks were appointed in those days to check the public accounts.
  • Objectives of Audit and Auditing
    To determine and judge the reliability of the financial statement and the supporting accounting records of a particular financial period is the main purpose of the audit.

Comments

Indra from India on October 03, 2020:

Audited Accounts are necessary for the success of every company. Thanks for sharing

AMMAD on October 13, 2016:

Much Easy to Understand.

Zeeya on May 27, 2016:

Thanks

mubarak on February 12, 2016:

thank you

ROOH ULLAH on November 02, 2015:

audit is the combination of 5 w's . what , when, where ,who .why

Meghna on July 25, 2015:

Thank you :)

eso kay II on March 12, 2014:

Thanks!

mahed faryad on February 07, 2014:

this is very usful for me and my studies please add more related topics thanks

judy gacheri on July 31, 2013:

wow! very easy to understand,,,,thanks

diana on March 01, 2013:

thx a lot,it was h helpful

abid ali on November 27, 2012:

i cant this plz tell me about this i have no id in this ? i am the student of finance so if u help me so plz plz plz

IIUC king on November 24, 2012:

helpful for the student

AMRIN on July 29, 2012:

useful information thanks a lot :)

IT Infrastructure Audit on July 17, 2012:

It audits are an excellent way for you to get closely involved with a business’ systems. It enable to prove your value to a client.

lucas mzuri on June 08, 2012:

make them clear, bigup guys.

rajib on May 06, 2012:

FOR THE ADVANCEMENT OF CIVILIZATION PERFORMING AUDIT ETHICALLY IS VERY IMPORTANT.

Vinjeru kamoza chirambo on April 27, 2012:

My auditing problems now getin simplifyd coz of this page

vfvfv on March 17, 2012:

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suneer manu on February 12, 2012:

more n more useful points. Thanks 4 ur help

rachel Makhurupetsi on February 10, 2012:

Great points, easy to anderstand. Thank you.

Jenishla on February 04, 2012:

nice explanation thank u

Arfa munir on January 31, 2012:

Wow......!! XoOo easy to understand...!

Nzenwa kelvin on November 02, 2011:

Tanks for your help

marzipurian on October 29, 2011:

very good information about headings but please it should be in the form of heading thanks very much thanks\

sathya on October 13, 2011:

thank u very much for ur very useful points

eugen on September 27, 2011:

Hi Lamsam,

Thank you very much for the good materials as tools to build up financial skill

I will be grateful if you send more at my e-mail address eugenekare@yahoo.fr

Thank you

zaheer7744@yahoo.com on September 18, 2011:

hi

its very usefull for me

its very clear and easy to understand i hope i get more benefit from this

i request u to give more theorys to learn

viswanath sarma on August 17, 2011:

Really useful. Thank you.

Shayan on March 10, 2011:

hi i am thankful for your explanation. i am a man from iran. i am M.A of accounting. i like to have a relationship for you. this is my email:asheghe_eshgh201084@yahoo.com) please email me and send me your email address. i am waiting for your email.

mcbrick on September 08, 2010:

You are a good looking "finance" girl. I graduated with a finance degree and there weren't many "lookers" that studied it.

ALI on August 25, 2010:

AUDITING IS THE EXAMINATION OF AN ACCOUNTS

Helna (author) on April 29, 2010:

Thanks all

Thanks for your visit and comments

EDSON JOHANNES OWUSU on April 14, 2010:

WOW A GREAT PIECE OF INFORMATION

IlearnedToday from Montreal on March 30, 2010:

Interesting hub

pertinent information

Abdel

Sage Williams on February 28, 2010:

Great tips, very informative and well written.

Sage

Gentlemaan on February 28, 2010:

All good tips, thank you for sharing