What is the purpose of conducting audits What are the benefits of conducting audits?

Auditing Advantages And Disadvantages: Auditing is a process that involves examining an organisation’s financial statements to determine whether certain aspects are compliant with the law, accounting standards, and accounting principles of a certain country. In other words, an audit is a process commonly used by organisations and governments to assess their effectiveness and efficiency. The type of audit and what it is looking for are based upon the policy of the organisation or government. Some benefits of an audit include having a different point of view, and seeing what processes could be improved. Disadvantages can be delays, high costs, long hours, lack of information, lack of ownership in the process among others.

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However, the term ‘audit’, can also be expanded upon (from a business perspective).  It is an umbrella term that encompasses a range of activities and projects that are designed to determine whether the objectives set for them have been achieved. These activities can range from the routine, such as IT support and business process improvement to less common tasks like risk management and compliance audits. Furthermore, if a company has been audited, it should be aware of the advantages and disadvantages of this process. In this article, we shall learn the advantages and disadvantages of the same in detail.

• Advantages of Auditing 
• Disadvantages of Auditing
• Comparison Table for Advantages and Disadvantages of Auditing
• Conclusion on Auditing Advantages And Disadvantages
• FAQs on Auditing Advantages And Disadvantages

Following are a few advantages of Auditing:

• Ensures compliance – The significance of auditing is this process ensures that policies and procedures are in place to protect the public interest. Also, by conducting an audit, the management can ensure that their practices are compliant with best practices and effective for the organisation. Furthermore, auditing helps to identify trends and whether or not there have been any changes or issues with management or other company processes.
• Auditing helps with business or system improvements – Audit is a way to test the system and identify opportunities that can be used to improve business performance. Auditing helps with implementing changes in the system and detecting improvement opportunities. By auditing, we can see if any specific processes are not performing as expected or not being followed.
• Provides credibility – Auditing is a process in which an independent party makes sure that there are no financial losses or problems with the company that the company has not disclosed. This can be done through the use of third-party auditors, financial statements, and internal audit processes. In today’s day and age, it is important to have credibility in your business. Auditing offers credibility because it allows you to run your business without fear of being discovered for some kind of fraud.
• Prevent fraud – Auditing is the best way to reduce fraud and corruption. Financial audits are undertaken to monitor a company’s financial health. Embezzlement and other fraudulent activities can occur within companies, contractors, agencies and institutions that receive government funding. Audits can also be conducted on individuals and it is usually an annual requirement for them to carry out this process. Auditors should be able to detect cheating in any of the following areas: accounting, employee management, inventory control, logistics, procurement, risk management, sales records and more.
• Useful for Planning and Budgeting – Audit planning and budgeting is part of the auditing process. It plays a significant role in finding hidden risks or opportunities within the planned activities. For example, auditors can plan to perform an internal audit once every three years during the full cycle because this provides enough time for corrective actions to be implemented before any major problems arise.

Disadvantages of Auditing

Following are a few advantages of Auditing:

• Auditing is Costly – Auditing can be a costly process that may require the implementation of many different measures to ensure compliance. These measures could include hiring an external auditing firm, or subcontracting specific areas and continually monitoring their results. The costs associated with auditing could reach a point where it might be not feasible to implement the process every often.
• Auditing requires experts – Auditing in general can be a very difficult process and requires considerable knowledge and experience. Moreover, auditing for large companies is both cost and time-intensive. Accounting firms tend to charge high prices because they have access to unprotected client data. This is a huge problem because it means company employees can use this information to commit fraud or theft in the workplace.
• Impossible to check all transactions – The key disadvantage of performing an audit is that it is impossible to check all transactions that are taking place in the company. This makes constant monitoring a challenge for audits in business settings.
• Unsuitable for small businesses – Auditing is a highly intensive process that requires substantial time and resources. Most small businesses do not have the in-house expertise or the resources to conduct audits. Instead, these companies should invest their efforts in improving their processes and decision-making so that audits are unnecessary.
• Bribes and threats: It’s easy for an auditor to be tempted by bribes and other incentives that can significantly raise the value of their audits. Similarly, threats posed to an auditor can also impact an audit’s end result.

Comparison Table for Advantages and Disadvantages of Auditing

Following are the advantages and disadvantages of Auditing.

Conclusion on Auditing Advantages And Disadvantages

Auditing is a tool used by many businesses today to make sure they are operating in accordance with the law and also to get an idea of how healthy their company is.  It is used to help understand the cost and performance of existing investments. Auditors also provide advice on how to improve future investments.The success of a project depends on the insights that are gained during an audit. Auditors can find many advantages using these insights to make better decisions. They can also uncover some disadvantages which could change or even eliminate the investment altogether.

FAQs on Auditing Advantages And Disadvantages

Question 1.
What is Auditing?

Answer:
Sometimes a business will have an audit done on its activities. An audit is an in-depth review of the company’s books and records to make sure there are not any irregularities or inconsistencies. Auditing also allows a company to plan and budget effectively. This is important because it can show what has been done, what hasn’t been done, and what needs to be done so that the company can be better prepared in the future.

Question 2.
What are the advantages and disadvantages of Auditing?

Answer:
Audit is an important process of financial management that reveals check fraud, potential fraud and other issues. Auditors focus on the accuracy of recorded transactions and avoiding fraud by double checking the accuracy of transaction records. One of the major disadvantages of auditing is that it is impossible to check all transactions. When auditing becomes too burdensome, companies will often neglect it. This can lead to a loss of data and other financial problems.

Question 3.
What is the purpose of auditing?

Answer:
Auditing is a process that ensures that an organisation’s financial statements, internal controls, and related disclosures are correct and in accordance with prevailing accounting standards. This process is to assess the accuracy of the financial information of organisations.