Audit has become an essential job in the business organization. All the organizations such as commercial, business, social, industries related and trading organizations prepared books of accounts of an audit. Now-a-days, management of the business and owner of the business are separate. So, in this situation to discover and check frauds, auditing has become necessary part of organization. The following are the main advantage of an audit.
An Independent Verification of Accounts
The main advantage of an audit 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 made willingly or innocently while recording the transactions. Because accounts auditor, errors and frauds detected and their future prevention secured due to the moral effect of the audit.
Reliability of Accounts
Human beings maintain accounts 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 maintained correctly. So audited accounts 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.
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
The audit tends to keep the accounting work efficient and up-to-date. so the members of the business enabled to obtain any desired information from their accounts at any time without any delay.
It legally requirement of a company that qualified auditor examine the account . So with the conduct of the audit, one of the legal requirements fulfilled.
Satisfaction of the Shareholders
If the accounts have audited, the sole traders, partner and shareholders feel satisfaction about the accounting records and financial statement.
An auditor consulted in respect of various business and managerial problems. So 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. So Suitable precautions and preventive measures may immediately adopted for the future.
Valuation of Business Property
Audited accounts considered more reliable as evidence in the court of law.
Audited accounts also considered reliable for the purpose of income tax assessment. So claims for compensation regarding losses by fire, proposed sales of the business raising loan etc.