03 Jul What Are the Pros of an External Audit?
Any business owner knows how important an audit is. Although it can be done by in-house accounts (via internal audit), external audit is the way to go.
External audits provide unbiased and objective information based on what they can find on a company’s financial records. The review can be looked at by everyone, including potential investors who are looking to invest their money on the organization.
That being said, it also provides a slew of other advantages as well which I will talk in more detail in this article. While you’re reading this article, I suggest that you open up a new tab and look at audit firms in Kuala Lumpur as they have pretty good auditing services.
Assesses the Effectiveness of Internal Processes
An external audit will help assess a company’s internal processes, especially those that pertain to transaction processes.
They will look at the different business processes and will verify that the authority checks are working as they should and are recorded properly in the books.
Auditors will also look at your company’s computer systems if they have the latest software and if it is working correctly. Although, I do have to point out that it doesn’t necessarily involve IT processes.
If there are any control issues that might hamper the validity and accuracy of the information that will be recorded in the financial records, that will be relayed to the company owner.
Identification of Errors
As a business owner, you are more focused on to improve your business and maximizing the profit gain. You might already have competitive accountants that will be able to list all of the important items in the financial books without any errors- or so you think.
Even though you have highly competent employees, conducting internal audits might have biases in the review along the way.
Reports that are done by external auditors ensure that their findings are based on objective data and it is not mired in any way of biases. Once errors are identified, this will be told to the company owner.
Acceptance of Audited Statements
Whenever you need financial backing in order to acquire goods or for company growth, banks and major financial institutions would require the company owner to provided audited financial statements that are done by an external auditing firm.
Audited financial statements will assure the banks that the information that is stipulated therein are authentic and are based on objective data. It also tells them that the company has the capacity to pay the money that the business owner is going to borrow.
The financial statements will also serve as a basis to help lending companies know of your company’s current value. You can have an estimate of your company’s value by looking at your net assets adjusted for goodwill.
Financial statements made by external auditors will reflect what kind of owner you are. It also tells others that you are an owner that values transparency and objectivity.
These financial statements can also help clarify any issues that may arise as a result of business partnerships.