Page 9 - CA Inter Audit PARAM

CA Ravi Taori
CA about advantages of getting his accounts audited throughout the year so that he may not suffer due
to accounting weaknesses. Advice regarding advantages of getting accounts audited.
OR
What is the importance of having the accounts audited by independent professional auditors?
OR
Advantages of independent audit.
OR
The chief utility of audit lies in reliable financial statements on the basis of which the state of affairs may
be easy to understand. Explain stating the advantages of independent audit.
OR
Having accounts audited by independent auditor, among other advantages, acts as a moral check on the
employees from committing fraud. Explain stating the advantages of independent audit
Answer ➢ The chief utility of audit lies in reliable financial statements on the basis of which the state of affairs
may be easy to understand. Apart from this obvious utility, there are other advantages of audit.
Some or all of these are of considerable value even to those enterprises and organizations where
audit is not compulsory, these advantages are given below:

➢ As auditor regularly visits client
It acts as a moral check on the employees from committing defalcations or
embezzlement.
As an appraisal function, audit reviews the existence and operations of various controls
in the organizations and reports weaknesses, inadequacies, etc., in them.
(Delivery confirmation is not signed by customer, he can deny delivery or someone else
may take goods)
An audit can also help in the detection of wastages and losses to show the different ways
by which these might be checked, especially those that occur due to the absence of
inadequacy of internal checks or internal control measures.
(Excessive Raw Material Cost per Unit / Labour Cost Per Unit / Overhead Cost Per Unit etc.
while doing analytical procedures)

➢ As auditor finishes audit
It safeguards the financial interest of persons who are not associated with the
management of the entity, whether they are partners or shareholders, bankers, FI’s,
public at large etc.
Audit ascertains whether the necessary books of account and allied records have been
properly kept and helps the client in making good deficiencies or inadequacies in this
respect.

➢ Post Audit Benefits
Government may require audited and certified statement before it gives assistance or
issues a license for a particular trade.
Audited statements of account are helpful in settling liability for taxes, negotiating loans
and for determining the purchase consideration for a business.
These are also useful for settling trade disputes for higher wages or bonus as well as
claims in respect of damage suffered by property, by fi re or some other calamity.
Audited accounts are of great help in the settlement of accounts at the time of admission
or death of partner.
Author’s Note:
Following questions have the same answer, so it is advisable to remember only one answer as given in
above and reproduce it everywhere.
• Advantages of independent audit
• Advantages of audit of partnership firm.
• Advantages of Sole trader

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