Why Do You Need External Auditing Your Business?
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External auditors are important to establishing your small business’ credibility. They ensure your business accounting and operations comply with relevant laws. Your external auditor ensures that the financial practices of your business are in line with generally accepted accounting principles and would help you spot real or potential problems. Therefore, Why Do You Need External Auditing Your Business?
Why Do You Need External Auditing Your Business?
Consequently, as a businessman or woman, you will be posed with business questions like the following.
- Why Do You Need External Auditing Your Business?
- How does auditing affect management decisions?
- How does business accounts audit help the management?
- What are the advantages and benefits of external auditing of your business? And,
- How does business accounts audit help the management? – This is to say ‘ How does audit help businesses?
This post gives you the answers to these questions, and provides you with reasons why you do need independent auditors.
Why Do You Need External Auditing Your Business?
The Accounting Firm:
Complete Full Marks Consultants Limited (CFMC Limited), the owners of this website is an Accounting firm incorporated in Nigeria. Its services include accounting and auditing services, tax management and business management consultancy services. If you contact us, as your external auditors, you will enjoy all these benefits enumerated on this post. Why Do You Need External Auditing Your Business? Read more about Why Do You Need External Auditing Your Business?
What is Audit?
Audit is the examination or inspection of your various books of accounts by CFMC Limited, external auditors. The audit exercise includes physical checking of your inventory and fixed assets to make sure that all your business departments are following documented system of recording transactions and safeguarding the assets in their custody. It’s done to ascertain the accuracy of financial statements provided by your organisation.
Furthermore, an audit is also a systematic and independent examination of your business books, accounts, statutory records, documents and vouchers to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. This means, any subject matter may be audited.
Why Do You Need External Auditing Your Business?
Types of audit:
There are both financial and non-financial audits.
Financial audit may be narrowed down only into External and Internal audit. The external audit is our concern in this write-up.
There are a number of type’s non-financial audits, non-statutory and internal audits, that you can conduct for your business. There could be:
- Compliance audit,
- Construction audit,
- Management Audit,
- Information systems audit,
- Investigative audit/Forensic,
- Operational audit, and
- Tax audit.
The Benefits of External Audit:
A a matter of fact, the other types of audit enumerated above, we will take care of in later publications, however, our concern here is on the benefits of having your accounting system audited by an external auditor. External Audit is also known as statutory audit.
Understanding the following questions will help you know what you stand to benefit from auditing your business accounts.
- What does audit mean in business?
- Why is an audit beneficial? And,
- Why does government/agencies require audited accounts as a prerequisite for contract award in Nigeria?
- Why do you need an audited account to obtain statutory documents?
(1) In the first place. the purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increasing user confidence in the financial statement, reduce investor risk and consequently reducing the cost of capital.
(2) Again, the audited account is today a prerequisite for government contract bidding in Nigeria.
You need your audited account to obtain your Tax Clearance Certificate, Industrial Training Fund compliance certificate, and others.
(3) Furthermore, an audit helps to identify weaknesses in the accounting systems and enables auditors to suggest improvements.
(5) In fact, an audit assures directors not involved in the accounting functions on a day-to-day basis that the business is running in accordance with the information they are receiving and helps reduce the scope for fraud and poor accounting. Seek startup tips
Why Do You Need External Auditing Your Business?
(6) Again, an audit facilitates the provision of advice that can have real financial benefits for a business, including how the business is running, what margins can be expected, and how these can be achieved. Advice can cover anything from the tightening of internal controls to reducing the risk of fraud or tax planning
(7) Consequently, an audit will enhance the credibility and reliability of the figures being submitted to prospective business purchasers.
(8) Finally, an audit adds credibility to published information for employees, customers, suppliers, investors and tax authorities:
- Audit affects Credit ratings,
- Suppliers may not give appropriate credit limits.
- Banks and trade suppliers rely in part on credit rating agencies assessment of the company and will look more favorably on companies that have an audit
- In the event of insurance claims, loss adjusters often have more faith in audited accounts
- An audit provides assurance to shareholders (if they re not directors closely involved in the business) that the figures in the accounts show a true and fair view
Why Do You Need External Auditing Your Business?
As a Firm of Chartered Accountants and Tax Practitioners, we ensure you have all the benefits enumerated above. For your business challenges send mail via [email protected] or call +234 8034347851. Call for your business plans, contract bidding compliance certificates, C.A.C incorporation services and your mining licenses.
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Why Do You Need External Auditing Your Business?
As you can see, External auditors play a crucial role in enhancing the credibility and overall financial health of your small business. Here are several reasons why you need external auditing for your business:
Independent Assessment:
External auditors are independent third-party professionals who have no vested interest in your business. Their objectivity ensures that the financial statements and internal controls are examined without bias, providing a fair and unbiased assessment of your business’s financial position.
Credibility and Trust:
Having your financial statements audited by an external auditor adds a layer of credibility to your business. This verification from a reputable auditing firm instills trust not only in your stakeholders but also in potential investors, lenders, suppliers, and customers.
Compliance and Regulation:
Many industries and jurisdictions have specific regulatory requirements and financial reporting standards that businesses must adhere to. An external audit helps ensure that your business remains compliant with these standards, reducing the risk of legal and financial repercussions.
Identifying Errors and Fraud:
External auditors are skilled at detecting errors, inconsistencies, and potential fraud within your financial records. Identifying and rectifying these issues early can prevent significant financial losses and reputational damage.
Why Do You Need External Auditing Your Business?
Improving Internal Controls:
Through the audit process, external auditors evaluate your business’s internal controls. They may provide valuable recommendations to strengthen these controls, minimizing the risk of financial mismanagement and fraud.
Better Decision Making:
An external audit provides management with accurate and reliable financial information. With a clear understanding of the company’s financial position, leaders can make informed decisions and develop effective strategies for future growth.
Access to Capital:
When seeking loans or investments, external audits are often required by potential lenders and investors. Having audited financial statements can facilitate the funding process, as it gives external parties confidence in the accuracy and reliability of your business’s financial data.
Benchmarking and Performance Evaluation:
Comparing your financial performance against industry standards and key performance indicators can provide valuable insights. External auditors can offer such benchmarks, allowing you to gauge your business’s performance relative to competitors and industry peers.
Enhanced Transparency:
External audits increase transparency within your business. This transparency can foster a positive organizational culture and encourage employees to follow ethical practices, knowing that financial transactions are subject to external scrutiny.
Why Do You Need External Auditing Your Business?
Legal and Regulatory Compliance:
In some cases, an external audit may be required by law or regulatory bodies. Non-compliance with such requirements can lead to penalties, fines, or even legal consequences, making the involvement of external auditors vital.
In summary, external auditing is an indispensable tool for establishing your small business’s credibility. It provides an objective evaluation of your financial records, strengthens internal controls, and builds trust with stakeholders, ensuring the long-term success and growth of your business. Now, bookmark Why Do You Need External Auditing Your Business?
Deacon Anekperechi Nworgu, a seasoned economist who transitioned into a chartered accountant, auditor, tax practitioner, and business consultant, brings with him a wealth of industry expertise spanning over 37 years.
