Importance for Audit of a Company in the Modern World
The modern world is more connected, organized and progressive with the adoption of technology. Globalization has eased the sharing of technology, best practices and culture. The opening of markets, especial by the Middle Eastern countries, has resulted in many international companies foraying to tap potential growth in these markets. The Government has adopted modern practices in line with the international practice codes.
Audit
Auditing exercise is an essential business requirement that involves assessing available evidence and all documentation about the financial and transactional activities of an organization. The primary purpose of an audit is to put forth an open-minded, neutral and independent examination of the financial records and provide the financial state of affairs of the company in the form of financial statements. As a result, the audit increases the trust and reliability of the statements prepared by company management which further enhances shareholder confidence, mitigate investor risk. The auditing process involves coordination with the in-house team, collecting and examining documents, and collating found evidence. The exercise can range from a very simple to complex process to inspect the company documentations.
An Auditor is a qualified professional who inspects the company financial records to evaluate the evidence obtained. The audit process involves collating the financial statements, preparing the report and analyzing the report to resolve the issue. The total independence of the auditor is a crucial element in the business industry because it aims to protect the financial interests of the different stakeholders. The audit applies to various functions in a company. They are
- Statutory Audit
- Compliance Audit
- Financial Audit
- IT Audit
- Investigative & Forensic Audit
- Operational Audit
- Tax Audit
- Supplier and sales Audit
Advantages of Company Audits in Modern World
There are numerous advantages of company audits. In the modern world, an audit is more of a mandatory requirement than a choice for a company as the shareholders include many local, international investors, private equity funds and other institutional investors. Some of the advantages of the audits are:
- It aims to protect company assets and minimize the possibility of potential fraud.
- It ensures productivity improvement in company operations.
- Ensuring staff integrity and financial reliability of the company.
- Establishing compliance with relevant statutory rules and regulations.
- Audited financial statements allow the potential investors to assess the risks and make an investment in the company.
- Shareholders trust the audited financial statements authenticated by a third-party auditor.
Audits are crucial in a country’s economy. The audits reinforce trust in the company, strengthen accountability factors and enhance confidence in financial reporting practices followed. Audits increase the company value and number of transactions that individuals may be willing to carry out.
In recent times, the modern world has witnessed many corporate scandals. It has led to an increase in the global investor demand for improved audit quality and strict regulations. The appointed auditors must offer top assurance over a broader set of company information or data as they have broader access to company records than any other party involved. Auditors who are qualified professionals may certainly have honed the skills to provide the necessary information in more difficult judgmental areas. Auditors give insights on internal controls, risks, company IT infrastructure and other issues put forth to the audit committee.
Investors often require credible information about the company figures, given that they are charged with making the capital investment into a possibly uncertain future with unpredictable risks. Investors frequently want to study and understand the risk management structures and internal controls effectiveness employed in an organization. The investors further feel confident and comfortable with estimates made by the analysts and would welcome any insight from their auditors on the same.
