What is the purpose of an accounting audit? | ecadema

An accounting audit helps in the financial record-keeping process of any organization. Accounting translates the flow of money in an organization, auditing is more of a specialized service. Auditing is a kind of examination of the accounting and financial records that are undertaken independently and performed to determine if the business undertaking has confirmed its operations to the laws. 

It is a must for a corporation to keep a track of all their financial activities and help you keep track of your business, as it can be a daunting task. Accounting reliably records every aspect of financial activities taking place through a company, which can be crucial for your company. Accounting keeps you updated about the company’s progress and ensures help in identifying the underperformance phase that requires corrective measures to be taken. 

Doing accounting for your business derives needed information that assists in long-term project planning. Financial reports generated from audit accounting can be used for different requirements. The Board of directors, shareholders, board of management, tax department analyze these audit reports to assess the quality of information that present in the financial statements.

Why do we need accounting?

The prime purpose of the audit is to identify all possible financial irregularities and look out for signs of potential material fraud, not necessarily that all frauds will be identified. Accounting principles allow you to create and maintain credibility with your competitors and vendors. Your financial position ultimately tells about your credit score and investors can also forecast the risk and opportunity your company could offer them. An organized auditing accounting system keeps you safe when your company pays taxes, files returns, or when it is time to claim deductions.

Helps in the negotiation of mergers and acquisitions. Account audit also helps you to obtain a credit period or credit card for an extended period.

Purpose of audit on financial statements:

An audit report could be used for many different purposes:

• Maintains the integrity of an organization and if an audit finds the financial statements are true and fair, based on this information, shareholders and investors could invest in the company.
• Reliable and clear financial statements attract new investors and investors may check the audit report to check if financial statements are not true and fair.
• To avail easy or extended bank loans, as the bank checks the financial status of the entity. Banks check the audit report to look at financial statements and sometimes request the entity to submit their financial statements along with audit reports.
• The main purpose of accounting and auditing includes auditing the financial statements using professional techniques to assess that financial statements are prepared correctly or not based on the applicable accounting framework. 
• The preparation of financial statements is not the responsibility of the auditor. Management also plays a crucial role while preparing the financial statements, eliminating the risks of error or misstatements.
• Regular financial audits help in identifying, whether the organization’s financial statements accurately represent the results of the business’s financial operations or not.
• Compliance checks while financial audits help companies to function in accordance with the laws and regulations that may materially impact the financial statements. The audit also checks if the company has followed the laws and regulations.

Accounting is a growing field and getting an opportunity to develop a career in accountancy by registering in an online professional accounting course at ecadema. Regardless of size, all organizations are required to keep track of their financial transactions and budgets, also maintaining and issuing accounts, all of which require professional accountants. 

 

Learn accounting fundamentals to read financial statements by joining online professional courses. The course provides the confidence you need to perform world-class financial analyst work. Start enrolling yourself of course! !-- Begin of the code -->

Mariam Moussa is an egyptian professional leadership coach, founder of PROCIJ and online trainer at ecadema