The process of auditing involves checking books of accounts to ensure their accuracy and trustworthiness. It is a critical process for the company, the government, shareholders, creditors, and shareholders, among others. To make key judgments, they all rely on audit reports. Audited financial statements have both advantages and disadvantages. Many businesses are nowadays opting for outsourced financial planning services. Read the full blog till the end to know about the positives and negatives of audited financial statements.
Positives of Audited Financial Statements
Owners/Investors Can Rest Assured
One of the most significant benefits of audited financial statements is that they provide comfort to owners, investors, and shareholders. To business owners, the accuracy of the books of accounts will be guaranteed. They will be pleased with the efficiency and financial performance of their business operations, as well as the functioning of their numerous departments. The same is true for investors, who will find confidence in the account books after they have been audited.
Errors and Deceptions
An error is an unintentional blunder or a mistake made without the goal of defrauding the firm. Fraud, on either hand, is an intentional act. Both errors and scams are found during the process of auditing. Auditing also aids in the prevention of such mistakes and fraud. It instills a fear of being discovered. As a result, auditing assists us in reducing the danger of errors and fraud in our books of accounts, but it does not completely eliminate the risk. There’s always the possibility that the mistake may go unnoticed, and that the scam will be undiscovered due to its sophisticated concealment.
Independent Point of View
The business can acquire a second view of its financial accounts and financial position if the auditor is an outsourced financial planning firm. An external auditor will thoroughly examine the records and, because he has no hidden objective, will be entirely honest and fair in his assessment. When he states that the accounting is truthful and fair, it carries a lot of weight with the company and investors.
Checks Your Morale
Another benefit of audited financial statements is that the company’s staff members do not try to steal or mislead the company. Since they are aware that their accounts will be audited, they are constantly scrutinized. Any inconsistencies can be spotted during such an audit and they will eventually be discovered. This encourages employees to be truthful and accountable at all times.
Stakeholders such as creditors, investors, banks, debenture holders, and others can have increased confidence in the books of accounts after an audit. As a result, the accounting information has higher credibility after being audited by an independent authority.
Negatives Of Audited Financial Statements
Factor of Cost
A complete and detailed audited financial statement would be prohibitively expensive. It is not economically viable. As a result, the auditor must narrow the extent of his audit and employ sampling and test verification techniques.
Factor of Time
Auditors usually work on a very strict schedule. Legal Obligations can sometimes be the cause behind this. This implies in a matter of weeks, they will have to audit a full year’s worth of accounts. As a result, lack of time is one of the most significant restrictions of auditing.
Evidence That Isn’t Conclusive
Rather than being conclusive, the audit evidence gathered by the auditor is compelling in general. In most auditing situations, there is never 100 percent compelling proof. This is one of the auditing’s primary drawbacks. Estimates are also frequently used in accounting. On the precision of these estimations, the auditor is unable to assess or comment. He has no choice but to rely on his expertise.
Auditing allows us to uncover fraud and errors, as well as make recommendations for how to avoid them. The audited accounts are authenticated. Auditors, as competent experts in the field of accounts and financial legislation, also provide recommendations to the company’s management. Firms can aslo go for the outsourced financial planning services. You can also visit https://stamosandstamoscpa.com/ one of the best platform providing outsourced CFO services for small business. Visit them now and get your financial statements audited by experienced accountants today.