Auditing - Advantages

Following are the main advantages of auditing for different stakeholders −

For the Owner and Shareholders

• Sole proprietor of a business and partners of firm can rely and depend on audited financial statements.

• Auditing is helpful for valuation and business settlement at the time of admission of new partner, retirement or death of a partner. This avoids the risk of any dispute in a firm.

• Audited financial statement is the only way out for shareholders to judge the performance of the management of the company.

For the Management

• Auditing is helpful in detecting frauds and prevention of errors.

• It helps to keep the staff vigilant; as eventually the work done by them goes for an audit.

• Insurance claim can be easily estimated from audited accounts.

• Management can take advantage of expert advice of Auditor in financial matters.

• Comparison of financial statements of different years becomes easier.

• Assessment of Tax Liabilities is easy.

For the Government

Taxation authorities and all other Government authorities rely on audited financial statements; even the courts accept these as evidence when the situations call for.

For the Creditors

Creditors of an organization also rely on audited financial statements and accordingly grant credit limit to business entities.

For Others

• Audited accounts are easily accepted by insurance companies for settlement of claims.

• Audited financial statements are acceptable by bank and financial institutions and helpful in getting loans and credit facilities.