An annual audit is an integral procedure that business owners need to understand. Some business owners find the audit process very difficult. Most small business owners try to bypass the annual audit somehow. But problems arise when disruptions appear in their financial system. This is why it is highly important to conduct an annual audit for every business. However, external audit or internal audit, are the available options for businesses to consider.
Internal audit and external audit, both audit types, helps companies assess their internal controls, verify their financial records and eliminate discrepancies. It helps companies perform risk assessments, detect potential risks to their business, prepare new strategies and implement the right controls. Auditors help businesses run their operations smoothly and efficiently. But here comes the difference, internal audit is conducted by an internal employee of the same organization. Chances are that he is biased and prepares reports which are not transparent and accurate. However, an external auditor is performed by an independent auditor or firm who is linked with the internal system of the company. Moreover, this type of audit will give more transparency and insights about the business without any biases.
Certainly, external auditors function better ensuring to provide organizations with high credible reports. Knowing the transparency of the prepared audit report will help stakeholders to make better decisions based on audit reports. Also, reports reflect the organization’s integrity, openness, and compliance with rules and regulations that can play a major role in maintaining your organization’s position in the industry. In Addition, the following are the benefits of external audit:
The purpose of conducting an audit is to highlight any mistakes in your operational system. Errors in financial records can cost huge damage to the organization. Therefore, it is important to regularly conduct audit checkups to ensure the accuracy of your accounting system.
An audit strengthens the internal operations of a business. It removes all inefficiencies and gives new insights which add value to your business. It improves your business performance, attracts new investors, and makes the decision-making process easier.
Investing in an organization is a difficult decision for stakeholders. This requires an in-depth analysis of the company, it’s financial standing and the organization’s credibility. Therefore, audit reports provide a comprehensive overview of the company which verifies its trustworthiness and integrity. Ultimately, it enhances stakeholders’ trust to invest in an organization.
Analyzing your organization’s weaknesses, any loopholes in your financial system, and potential risks can save your business and run smoothly. Business owners should be vigilant in detecting risks timely with the help of auditors to protect their internal controls and implement remedial measures.
