In this tutorial, we will learn about the advantages of an audit report. It is a report prepared by the auditor covering its assets and liabilities to show its current financial position and future.
It shows the accurate financial position of your company. Audit reports help prove management integrity to their shareholders – whether the company is honest and precise towards their shareholders or not.
Advantages of an audit report prepare by the auditor covering the company assets and liabilities to show the company’s current financial position and future. It covers all the financial aspects of a company. The audit report generally covers financial statements for 12 months. An audit report is an essential document, and the law requires it.
- If the company is publicly traded on the stock exchange.
- If the company lies under the industry regulated by the securities & exchange commission (SEC).
The audit reports are used by various individuals who are having an interest in the organization, and it includes the following:
Audit reports are used by investors to identify the company’s financial position for investment purposes.
Shareholders & board of directors –
Audit reports are used by shareholders and board of directors to access the transparency of financial statements and management’s integrity.
Banks use audit reports to know the company’s liquidity position and know whether the company can repay the loan (In case the loan is taken from a bank).
The government uses an audit report to check the completeness and accurateness of the tax.
- That helps in ensuring that all the essential areas are appropriately covered during an audit.
- Here helps in distributing the work among the assistants by their competence and experience level.
- It provides the instructions to the audit staff and reduces the scope for misunderstanding.
- It helps fix the responsibilities for the work done among the audit staff as the job done may be traced to the individual staff member.
- It helps in assessing the progress work by ascertaining what part of audit work has been finished and how much work is left.
- It serves as evidence against a charge of negligence.
- In completion of an audit, it serves the purpose of an audit record, which may be useful for future reference.
Advantages of an Audit Report:-
- It shows you the accurate financial position of your company.
- The audit reports help in proving management integrity to their shareholders – whether the company is honest & reliable towards their shareholders or not.
- Many parent companies having subsidiaries in the same or other countries want their subsidiary’s financial statements to get audited. Hence, it helps in managing the subsidiary more effectively.
- The auditor report helps in identifying the financial & non-financial problems of a company, which may save the company from facing bankruptcy issues in the future.
- An essential legal requirement to get your accounts audited to provide information about annual turnover, the value of assets, number of employees, etc. to the government and auditor is like evidence that can prove to the government that the particular entity is working correctly and by the law.
- It is the requirement of shareholders. They want their company’s financial statements audited. Then, the same report is examined by the experts and expressed in such a way that it can be understood by most of the shareholders who do not have strong finance or audit background.