Main Advantages and Importance of an Audit

The following are the main advantage of an audit.

An Independent Verification of Accounts

The main advantage of an audit is that and independent verification of the financial position and the earning capacity of the business concern are made by an auditor.

Detection and Prevention of Errors and Frauds

Generally errors are made willingly or innocently while recording the transactions. When accounts are audited, errors and frauds are detected and their future prevention is secured due to the moral effect of the audit.

Reliability of Accounts

Accounts are maintained by the human beings and there is every possibility or errors. Until and unless the accounts are not examined by an independent person, we can’t say that the accounts have been maintained correctly. So audited accounts are considered more reliable to the concerned parties as debtors, creditors bankers etc.

Settlement of Disputes

In partnership, audited accounts facilitate the settlement of accounts among the partners and avoid the possibility of future disputes among them.

Proper Supervision

Where the proprietor of a business concern cannot personally supervise his affairs, the audit acts as a check on the working of the employees and the losses caused by defalcations are avoided

Efficient Working

The audit tends to keep the accounting work efficient and up-to-date, so the members of the business are enabled to obtain any desired information from their accounts at any time without any delay.

Legal Requirement

In case of a company, it is legally required that it accounts must be examined by a qualified auditor. So with the conduct of the audit, one of the legal requirements is fulfilled.

Satisfaction of the Shareholders

If the accounts have been audited, the sole traders, partner and shareholders feel satisfaction about the accounting records and financial statement.

Valuable Suggestions

An auditor may be consulted in respect of various business and managerial problems and he may offer his proposals and expert advice to improve the accounting system of business.

Weakness of Internal Control

Audit will reveal weakness in the internal control of the business and defects in the accounting methods. Suitable precautions and preventive measures may immediately be adopted for the future.

Valuation of Business Property

Audited accounts are considered more reliable as evidence in the court of law.

Other Benefits

Audited accounts are also considered reliable for the purpose of income tax assessment, claims for compensation regarding losses by fire, proposed sales of the business raising loan etc.