Why audit is really important to a business.

Posted by Ca On Web on April 2nd, 2018

Audit service providers in India for financial statement audit are qualified chartered accountants. Why audit is really important to a business, well there are several advantages. When we simply think of a situation where there are no cross control checks of the books of accounts of any entity, what will be the situation like? Well, it will be a mess. In India there are several audits mandated by law under income tax, company laws, gst law etc. Audit compliance in India has to be followed by individuals and corporates as specified. Let’s see some points which will make it more clearly on why audit of financial statement is so important. Those making important decisions based on the financial condition of a business need reliable financial information. Such as bankers, suppliers, investors and potential merger partners prefer to have statements that have passed a rigorous examination by auditors.

Several entities like banks, finance companies, suppliers, insurance companies and investors-analyses the company with the help of audited financial statements. Since it is the matter of making investments by taking lot of risk it is natural that they would prefer to rely on the best auditing professionals who would give an expert opinion of the financial statements. The reliability of the financial statement arise only when those financial statements are audited.

Conducting an audit of a company's financial statements is a matter of planning the work and then going carefully through a process of observation, inquiry and inspection of internal financial books and records. Auditors undertake various tests, such as requesting confirmations of various balances in the book from customers/vendors in order to establish the accuracy of items in the financial statements. During the process, the auditors will construct an audit trail a chronological record of transactions which enables them to evaluate internal controls and company policies.

An audit can take weeks or months depending on the size and complexity of the company being examined. When the audit team has completed its work, it prepares its report. The report contains the auditors' findings about the financial statements and to what extent they conform to generally accepted accounting principles and auditing standards. The final part of the report contains the auditor's' opinion of the statements. The most favorable unqualified which reflects that materials were in order and met all auditing requirements. Qualified means that most, but not all, materials were in order. The worst is an adverse opinion means that the statements do not accurately reflect the company's condition.

It is always wise to reach out to audit service providers in India and know about the audit compliance in India. This makes sure that your business is complying with the regulations and there shall be no adverse effect such as facing interest and penalty in future.

 Summary: Audited financial statements gives assurance to stakeholders that they can form an opinion on making financial decisions.