Auditing has become a required task in the business organisation. All the organisations like business, social, industries and trading organisations make an audit of books of accounts. Nowadays, owner of the business and its management are separate. So, to detect and prevent frauds, auditing has become essential. Its advantages are as follows:
It Helps To Detect And Prevent Errors And Frauds
An auditor's main duty is to detect errors and frauds, preventing such errors and frauds and taking care to avoid such frauds. Thus, even though all organisations do not have compulsion to audit, they make audit of all the books of accounts.
It Helps To Maintain Account Regularly
An auditor raises questions if accounts are not maintained properly. So, audit offers moral pressure on maintaining accounts regularly.
It Helps To Get Compensation
If there is any loss in the property of business, insurance company provides compensation on the basis of audited statement of valuation made my the auditor. So, it helps to get compensation.
Helps You To Obtain Loan
Specially financial institutions offers loan on the basis of audited statements. A business organisation may obtain loan considering the audited statement of last five years. So, an organisation should make audit necessary to obtain loan.
Ease The Sale Of Business
Valuation of assets is made by the auditor. On the basis of valuation of assets and liabilities, businessman can sell his business. It helps to determine the price of business.
Helps To Assess Tax
Tax authorities evaluate taxes on the basis of profit calculated by the auditor. In the same way sales tax authority calculates sales tax on the basis of sales shown in the audited statement.
Facilitates To Compare
An auditor guides an accountant in the same way which helps to compare books of accounts of current year with the accounting of the previous year. So, comparing the accounts of current with previous years helps to detect errors and frauds.
Helps To Adjust Account Of Deceased Partner
Estimation of all the assets and liabilities of the business is made by the auditor while auditing books of account. Such valuation helps to clear the amount of deceased partner.
It Helps To Present A Proof
If any case is filed against the auditor regarding negligence, the auditor can present audited report as a proof to settle such case. So, it helps to present proof to settle such cases.
Provides Information About Profit Or Loss
A businessman wants to know profit or loss of his business after a certain period of time. So, the owner of the business can get information about profit or loss after auditing the books of accounts.
It Helps To Prepare Future Plan
All the audited statements remain true and correct. Such true and correct account aids to prepare for the future plans.
Helps To Increase Goodwill
Auditing shows the profitability and financial position of an organisation which creates faith of public over the business. Hence, auditing helps to increase goodwill of an organisation.
Helps To Amalgamate The Company
Sometimes, same nature of organisation may be amalgamated. Auditing makes valuation of assets and liabilities which helps to amalgamate the company. Buyer of the company can accept such business organisation on the basis of valuation made by the auditor.
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