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Auditing and Its Importance in Business

Auditing and Its Importance in Business

What is auditing is no longer strange to businesses in the current period of economic development. However, to understand correctly, it is essential to avoid confusion.

What is accounting?

What is accounting?

To understand auditing, we should first understand accounting. Because these two fields are directly related. Accountants will provide financial information about an organization through financial statements.

What is an audit?

The main job of the auditor is to check and verify the truthfulness of those financial statements. Thereby helping to provide the most accurate information about the financial position of the organization.

In other words, auditing is the process of gathering and evaluating evidence. These proofs are related to the financial information examined/provided by accountants. To determine and report on how well such information conforms to established standards.

Those who are interested in the financial situation of an organization but do not have expertise in finance or accounting. That is why they need auditors to learn and make appropriate judgments. This helps them make the best decisions.

Types of current audits

There are 3 types of audit

State Audit:

Conducted by the State audit agency by the law and free of charge. Usually, audited subjects are state-owned enterprises.

Independent audit:

Conducted by auditors at independent firms specializing in this service. Their main task is usually the audit of financial statements. In addition, there are other financial and economic services depending on the customer’s request. This type of audit is trusted by third parties or investors.

Internal audit:

Are internal auditors of a company or organization. They perform audits at the request of members of the Board of Directors or the Board of Directors. Usually, these audit reports are used only internally by the company which received little trust from the outside. Because these auditors are also company employees and work under the influence of the board of directors.

What is the meaning and effect of the audit?

What is the meaning and effect of the audit?

Auditing contributes to creating a trust for those who care

Auditing creates trust for interested parties such as state agencies, banks, and investors. Most are managers, employees, customers, suppliers, etc.

Career guideline

Auditing contributes to professional guidance and strengthens the order of financial and accounting activities in particular and audit activities in general.

Financial activities include many investments, business, distribution, and payment relationships. The complexity of this operation increases. Because of the close relationship between financial relations and human interests. Meanwhile, accounting information is a reflection of financial performance. And is the product of information processing by a very specific technical method.

Contributing to improving management efficiency and performance

Audits not only verify the reliability of the information but also advise on management. In the new conditions of economic mechanism transformation, the legal system is not yet complete… Therefore, maintaining discipline and ensuring development in the right direction can only be achieved based on synchronous construction. And the organization performs well the audit in all fields.

Importance of audit in business

Auditing acts as a guardian of business value. The purpose of this job is to ensure that the company’s operations comply with legal regulations. And comply with the business ethics and operating regulations of the company.

Auditing is also responsible for detecting errors in the business activities of enterprises. They act as advisors and guide the board of directors and the board of directors on risk control.

Besides that:

The next function of the audit is to help the business owner improve the weak points. These weaknesses come from the management system and corporate governance. By analyzing, checking, and monitoring the operational processes of the departments. Internal auditors will provide advice to help the company operate more efficiently and effectively.

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