Summary: What is the importance of an audit to a business? Read to know all the benefits that your business gets once you do an audit.
Do you own a small or established business? If the answer is yes then you probably have come across the word ‘audit’ if not doing it. Has your business ever done an audit of the financial accounts? Once you know more about audits you will appreciate the benefits that it brings to your business in combination with corporate services in Singapore. Everyone has a desire to see their business grow to greater heights.
Audit – What is it?
An audit is a special procedure involving the inspection of accounts and premises of your business. The accounts audited include invoices, financial accounts, and receipts. An audit is usually done to determine if the account statements represent your busyness’ actual value. An audit is not done by a member of staff but rather an independent individual or firm to minimize chances of bias.
What are the benefits of an audit?
After an audit is done, the real value of your company is uncovered. Often the values in the audit surprise the business owners and make them recognize the importance of an audit. Here are some of the benefits of doing an audit of your company.
Identify weaknesses in the accounting systems: This gives room for necessary improvements to be put in place to get rid of the weaknesses. You may discover that critical transactions are not accurately recorded in the system. After the weaknesses are determined measures can now be put in place to cover the loopholes.
Uncover fraud: This may include erroneous transactions between employees and customers. An audit identifies any forms of a fraud giving you room to get rid of the problems. Prevention of fraud improves employee relations and builds customer experience too.
Improve planning of taxes: For a free tax season, audit facilitates future planning of taxes making it less stressful during filing of returns. Lack of an audit plan makes tax filing strenuous since the business is not prepared for the expenses.
Identifying poor employee practices: This can consist of lazing on work and erroneous relations. Financial tracking enables you to identify such practices and take necessary action. Employees who abuse the codes of conduct of the business should be held accountable by facing disciplinary action.
Strengthens credibility: It can be related to financial records hence improving employee relations. This also boosts customer trust in the business. An effective audit ensures accountability in all employees, thereby increasing credibility in the business’ operations.
The pursuit of objectives of the business: It is enabled through audits. Having an audit system in place enables the business to focus more on development hence boosting the pursuit of achieving the objectives. Control is needed in the business process to facilitate monitoring, supervision, and prevent irregular transactions too.
Reduce mismanagement risks: This may arise from breaching of the normal flow of transactions in the business. The mismanagement risks are reduced since all accounts are scrutinized and credible statements issued.
Reduce misstatement risks: This may arise due to a lack of accountable finance department. With an audit system in place, the financial reports are reviewed by independent professionals, hence they are not biased. This makes it literally impossible for any fraud to happen especially in the financial department. Credible financial reports issued by the auditors give a clear base for planning in the company’s management.
Cost of capital: It is very essential for the growth of every company. It does not matter the size of your business, the cost of capital can boost your business from one level to another. This is mainly concerned with the risk that is likely to be experienced when a company decides to diversify investments. A strong audit plan reduces all the risks that may be encountered through investments outside the business.
Builds customer experience: This is one of the crucial aspects for the growth of any business. When all the accounts are scrutinized and detailed credible information given it builds customer trust in the business’ operation.
A strong audit plain is important for the growth of any business. Auditing prevents risks such as fraud, mismanagement, and misappropriation of business assets. The financial records of a business are also set clear through auditing. A perfect audit gives a true picture of the business position in the competitors ranking. You should also look for corporate services in Singapore for your business.