When you start your own company maintaining the records of the transactions you do becomes an integral part. It’s not possible for you to remember all records mentally and then analyze your company’s position financially like that. That’s the reason why every business has to have an accounting system. Well, there’s a myth that even you must be following that it’s better to have internal audits for those accounts as external audits are expensive and time taking. But that’s not true because having an internal audit means that your own branch of the company is analyzing your financial standards. But there are other advantages of external audit.
Internal Audit Reports might not be accepted at many places, especially on legal grounds if you have to face any. On the other hand, external audits have such advantages: they provide an unbiased analysis of your firm and give you a report accepted officially on every ground. As long as external audits are concerned, it is related to examining records that a third party or an outsider does. It does not matter if you have an accounts department of your own or hired an outside firm for accounting. Various accounting firms in India and abroad can do your company’s accounting. The main reason why people prefer external audits is because they are unbiased and provide truthful accounting information. The external auditors never hide anything wrong with the company’s accounts, which is why they are favored. Here’s a list of advantages that external audit has:
Comprehensive report
The external audits are done in a very systematic process. It’s a fact that accounting of a firm is a complex thing. But it’s the work of these external auditors that ultimately break it down and simplify it when they see through the records. So it shows in its final result all the important works that have been happening in the company. So that is how understanding the company’s financial position becomes easy. They just have to follow the audit result done through external audits. Also, because the external auditors have a stricter way of working, the business owners know what’s wrong with the internal business works they do. This gives them a chance for improvement.
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Stricter towards compliance
There is a significant difference between an internal audit and an external audit. For internal audits, one can manage any work that has not been performed according to the rules and regulations of accounting. That’s not the case with external audits. For eternal auditors, they come as a stranger to your company and just flip through your transaction book. They check how authentic your records are and if you maintain them according to accounting rules. The external auditors do not accept older accounting techniques if government has already implemented new accounting rules.
Reduction of Waste
External audits are systematic. When the auditors step into your company, they have a program planned in their mind as to how to work and what they need to see. That’s the reason why external audits take lesser time as compared to Internal audits. For internal audits, because it is a part of the business, the officials know that they can take time and have to go nowhere but stay in the company itself. That’s something opposite to external audits where the officials know that they are a third party involved, and their work should not affect normal functioning of the company. So they do their work as quickly as possible and save your time and resources.
Identifies Weakness
When the audit is done, the auditors understand very nicely what is the weakness of the company. And what should be some of the significant changes that the company needs to go through? Then, when they have an idea about that, they let the company’s management team know for the changes. Every company has some or the other kind of weaknesses. You need to understand the sort of weakness that your company has. Because that will make it easier for you to improve it and retain a good position in the market for a longer time.
There can be many other benefits that the company may have for conducting these external audits like that of external audit brings in investors as the investors can see the audit report and get an idea of the position of the company and decide whether to invest or not, brings a different perspective of seeing things and many more. But amongst all the minor advantages, these 4 are the significant effects that an external audit has on the company.
Yes, external audits can indeed be scary, but that can only be the case if you have not adequately maintained the company’s transactions. If you have an accounting firm that takes care of the accounting in the most updated way, you should not have a problem getting an external audit done. Instead, external audits bring out your company’s uniqueness and make it different from your competitors because of the critical perspective that they come along with.
