Auditing and Accounting are known to go hand in hand due to their closeness with one another and the increased number of benefits if one merges with the other. The Auditing Process in Accounting is of higher significance as it brings forward the financial integrity and stability of organizations, which is the primary need for an organization's economic well-being. The Importance of Auditing in Accounting is outnumbered, but unfortunately, it is often underestimated; this blog is because the role and significance of Auditing and Accounting in your company will be brought up with no boundaries.
What is Auditing?
Auditing originates from the Latin term "Audire", meaning "to hear,"- in medieval times, auditors had the responsibility of listening to their officers and people residing in the planes of authoritarianism. The main component of the job was to confirm the validity of the people in authority's words. Over the years, auditing took records of written reports and, gradually, financial records of businesses.
Therefore, it is defined as an official examination and relates to the verification of a business's financial records, thus relating to its Auditing and Accounting.
Are Auditing and Accounting similar?
No, both are not similar, as Auditing is defined as the process of recording, classifying, and making a summary of financial transactions. It forms a stable ground upon which the entire financial accounting system is erected, and this perfect process of financial information allows stakeholders to make informed decisions. Meanwhile, accounting is the diligent examination of financial records to ensure their accuracy and compliance with established standards.
Importance of Auditing
Below are the listed statements clarifying the importance of the Auditing Process in Accounting:
Say no to fraud
Suppose a government-aided auditing process figures out your financial statements and learns that your business has been systematically manipulating its financial health, which may include hiding revenue and losses. In that case, you will most likely be charged with severe fines and legal punishments. This will also result in your company earning a bad name for itself and closing all prospects of your customers relying on you.
However, this can be prevented through recurring internal audits by a professional auditor or an accountant hired by your company, thus letting them detect these fraud cases before they turn disastrous. Such a system thus prevents online cyber criminals from harming your business.
Increased reliability and credibility
Your go-getter attitude can lead you to go to higher places and help you achieve a lot of things, but shortcomings do occur, which is completely normal. However, if the shortcomings turn out to be overwhelming, then it's not alright, which is why the need for an auditory professional is a must for your business.
With the systematic operation of an internal auditory system, your business goes through the probability of creating accurate and trustworthy financial reports. This results in you gaining insights on which segments or product lines are at their best performance and leads you to allocate resources to those sectors diligently. The golden side to this is that regular auditing processes will lead your shareholders to trust your accounts' fairness, giving them the green light to invest in your business.
The processes of financial auditing are known to be the most elite of all, thus reducing its chances of creating fraudulent reporting or even honest errors that can tamper your company's reputation. However, a wrong figure in the financial report of a small company is known to have lesser effects as it is not so known to the people before it turns out popular. Things go way too high for popular companies with a huge consumer ratio, thus even leading them to lose a client or two. Getting an auditing professional will decrease the chances of your company turning these fears into the uttermost reality and help deliver its best, whether it's in the East or West.
Openings for Investors
Getting your hands on the best auditing professional will always ensure innumerable openings for multiple investors to come and merge with your business. Ask how? Regular health check-ups are necessary for a human to know the ongoing state of one's health. Similarly, if a business person is into regular auditing and is increasingly attentive to their company's health, then congratulations! You have already won your future investor's hearts. As the proverb goes, "Work is worship." Seeing your dedication and loyalty towards your company ultimately come out as generous results will bring in a great number of investors for your company.
Dose of confidence
An auditor not only diligently checks your financial outgoings and incomings but also gives you a taste of their expertise through effective measures that transform your basic ideas into extraordinary ones. The extraordinary ideas may send chills down your spine, but not for a longer period, as the best research backs these. Therefore, this makes you confident and helps your company grow in terms of finances. It also creates good relationships with other firms, thus improving your company.
Does Auditing give an accurate data?
Auditing does not always provide a complete guarantee that every digit being recorded in a company's financial reports is accurate. This happens because auditors mainly work within a specific, reasonable margin of error known as materiality. This margin of error, known as materiality, depends on the size of the company and its reported revenue and expenses.
Therefore, it may be safely concluded that the financial auditing of your company is truly dependent on you as you are the sole provider of your company's financial outgoings and incomings. Sometimes, business people make certain mistakes in their initial stages, resulting in them hiding their casualties. However, you must know that making mistakes is normal, especially when you have the courage to admit it and walk ahead with it, thus providing future generations with better ideas on how to go forward with one firm or newly found business.
Types of Auditing
Audits are characterized into three main types:
These are performed by a qualified auditor who is a part of your company and ensures your business's strong compliance with regulations, which helps unfold accurately recorded financial information. This promises risk management and protects against fraud, waste, or financial abuse.
This refers to the financial statements being brought forward by an independent, third-party professional, and these turn out to be extremely helpful as they are unbiased and reliable. Their candidness about the issues found during the auditing process does not cause casualties in the daily work relationships within the firm. Their responsibilities include planning and implementing audit procedures, examining accounts and financial statements, analyzing business risks, preparing an audit report, and discussing the conclusion with their client's management department.
Internal Revenue Service Audits, or tax audits, are government reviews that are conducted to ensure a business's financial data has been in the exact compliance that the government of India requires for it to be. Although these are sometimes conducted randomly, the IRS selects suspicious firms, thus making them eligible to conduct the audit through mail at the IRS offices or the business field itself.
Below are two main tips which can help your company ensure an easy and informative process of auditing:
Just because you read an arbitrary article over the internet that lacks a lot of informative ideas about why you should hire a professional auditing service, this does not merely solve the issue—having a clear goal about what you are looking to achieve answers all the questions.
As internal auditing involves reviewing a huge pile of information about your financial assets, be selective about which section you should first prioritize, which will lead to immediate auditing.
We at Especia specialize in providing our consumers with the best auditing services in accounting, as we believe they deserve the best. To enhance your company, book a session with Especia today.
FAQ’s (Frequently Asked Questions)
Why should I prioritize auditing more than accounting?
Auditing provides the most accurate data on your business's financial assets, so you must prioritize auditing more than accounting. After a write-up is completed, an editor is required to figure out its shortcomings and allow the writer to work on it. Similarly, Auditing is the editor of your financial report and helps rectify your reports, if any.
If Auditing does not provide an accurate result even after an extreme process of evaluation. Why should I even go for it?
Please note that you are the provider of your company's inputs and outputs reports to the auditory service you will be hiring. An inaccurate report will be generated if your data is wrong, whereas an accurate report will be generated if you give the right details about your company.
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