Advantages Of Auditing
Saturday 17th of September 2011 | By: Administrator | Views: 6346 | Comments: 0 | Rating: |
ADVANTAGES OF AUDITING
We can divide the advantages of audit into the following main heads.
1. TO THE GOVERNMENT
2. TO BUSINESS
a. TO SOLE PROPRIETOR SHIP.
b. TO PARTNERSHIP.
c. TO COMPANY.
3. TO PUBLIC
1. TO THE GOVERNMENT
The following are the main advantages that a government has received from auditing.
A. ASSESSMENT OF TAXES
If a business is audited, the tax authorities can easily assess the income and can impose tax according to the rules
B. FOREIGN AID
Another benefit of the audit to the Govt. is that the foreign agencies usually prefer to give aid to those companies who must audit their account.
C. ECONOMIC PROGRESS
The govt. can check the overall economic progress by the audited accounts. The Govt. can check the accounts of the companies and as a result it is in a position to take the proper step for economic progress
D. RECOVER OF TAX
As the authorities can assess the income within a short period and orders are received earlier which help towards the early recovery of taxes.
E. CAUSES OF PROGRESS
In the modern age for the economic progress, Joint Stock Company has played an effective role. Because the successful operation cannot be do without the audit .so it also a cause of economic progress.
Audit is also helpful for the issuance of various licenses by the Govt.
Through the audit, the government usually came to know the financial position of the companies. Thus the government is aware either the industries are earning profit or suffering the loss. If it considered that the industries are running in lose, the Government cans denationalization it.
2. TOTHE PUBLIC
The following are the main points of the advantages, which is enjoyed by the public.
A. SAFEGUARDED THAT INTEREST
It is perhaps the main advantage for which the public limited companies are liable to be audited their accounts compulsory, that due to audit the interest of public and shareholders is safeguarded.
B. BUSINESS OPERATION
Due to the audit the public receive the true and fair information about the accounts or financial position of the business. And they can also fetch the result.
C. IN VESTMENT
The investors are in the position due to audit, that they can guess or judge that actual financial position of the business and can make the investment.
D. CLAIM FOR LOSS
In the business the stock or property or other valuable things are insured. Risk is the fat of business, and due to any reason the loss is acquire as by theft or fire etc. Then insurance companies can receive the claim papers only when the auditor has verified the amount of that.
E. LOANS FROM BANKS
If the companies have sustained loss, it cannot pay its debt in time. So at that time the banks can reschedule the loans only. When the auditor verify that the loss, which is, sustain in actual.
F. AUDITOR’S OPINION
The auditor’s opinion and arguments are considered the final in the court of law. So the dispute are settled according to the evidence
G. INCREASE IN OPPORTUNITIES
Due to auditing, the business dealings are fair. The public trusts on the fact and easily invests their saving in the business. It is helpful in the extension of business. When the business extend there is need of more workers and auditors so, it create the better opportunities of the employment and working.
3 TOTHE BUSINESS
This head can be divided into three sub head
A) Sole proprietor
a) SOLE PROPRIETOR
According to this head the following are the main advantages.
(i). CHECKING OF ACCOUNTS
The proprietor is confirmed that these accounts are true and properly checked
(ii) POSITION OF BUSINESS
He is in a position after the auditing to know that what is the position of his business.
Audits also help him to prepare the financial statements and some to know that what is his liabilities and assets.
He is in a position to prepare the returns of income tax, sales tax etc.
(v) EASY COMPARISONS
By the audit the owner is in a position to compare the precious year profit with the current years and the expenditure with the current years. So, expenditure he can judge the fluctuation of his business
The following are the main advantages concerning to partnership business.
(i) FOR SLEEPING PARTNER
For the sleeping partner it is a great. ‘Because he cannot check the accuracy of the accounts by any other means.’
(ii) KNOWLEDGE OF AUDITOR
The knowledge of auditor is very helpful for the business. The partnership can improve their method and extend the business.
(iii) SETTLEMENT OF ACCOUNTS
At the time of death or retirement of any partner there is a need to settle the book of accounts. In this case also the audit is very helpful.
(iv) SETTLEMENT OF DISPUTE
Audit is helpful in the settlement of dispute among the partners because documentary evidence of all the assets and liabilities are present.
4. COMPANIES BUSINESS
For the companies the following are the advantages.
A. SAFEGUARD OF INTEREST OF SHARE-HOLDERS
Auditor safeguards the interest of the shareholders. So it acts as trustee.
B. TAXES FACILITIES
Auditor accounts are very reliable for the purpose of carious trust.
C. AUTHENTIC RECORD.
Auditor concerns are considered as perfect and correct evidence.
D. MORAL INFLUENCE
It has also a moral influence to the employees to be fair and check their dealing.
E. DECISION MAKING
The management can easily make the decisions by the regular audit.
F. UP-TO-DATE RECORD
The clerks and other staff up-to-date their records relating to the decisions by the regular audit.
G. DETECTION AND PREVENTION OF FRAUD
Auditing is helpful in the detection of fraud and also the prevention of fraud due to any reason.