IMPORTANCE OF AN AUDITOR IN A BUSINESS ORGANIZATION
Running a business organization comes with a lot of excitement and challenges. Planning strategies for managing finances and looking for potential employees is not a piece of cake. When it comes to managing finances, it entails a lot of responsibility. A slight mistake in calculation or a number can lead everything down the rail, and your company may endure the damage. Every company or business intends to grow further and minimize the chances of risk and damage as much as they can. A company or business also has stakeholders or investors that might want to see the financial progress before investing their money.
Maintaining the smooth sailing of finances requires a lot of effort and a skilled individual to keep track of things. Business organizations often have internal auditors, and in some cases, they hire an external auditor to scrutinize their financial operation. An auditor is a business professional whose job is to ensure the accuracy of financial statements and their compliance with the corporate and legal guidelines. An auditor guides an organization by giving them suggestions for improvement, telling them the legal and corporate policies, and providing ideas to enhance the financial operations.
An auditing system plays a crucial role in the smooth sailing of a company and to avoid financial risks. With a growing business, there exists a need for accountability and organized work. A company stakeholder or top management can ask to check the financial sheet before they can make a new purchase or assess the company’s capability to sponsor something new. The field of accounting has a diversity of professions. A student may wonder how to become an auditor, and their accounting degree can provide them the necessary understanding and expertise they need to become one.
An auditor or auditing system is the need of the hour for every business, and here are some of the aspects that auditing can highlight for you.
- DETECTION OF FRAUDS
If your business is in its early stages, or you are new to the corporate sector, you can easily fall victim to the wits and manipulation of the people around. Small businesses lose millions every year because of employee theft. These thefts are not like robbing a bank, but it involves check tampering, skimming more money from customers, and improper payroll transactions. Often these thefts are not visible unless you have someone with an eagle’s eye to detect it the moment it happens. An internal auditor can see all these disruptions by carrying out a detailed assessment of financial sheets to prevent the employees from misusing the company’s funds.
- ASSESSMENTS OF RISKS
A company’s financial reports serve as the key to open the pathways for external or internal operations. If a company convinces an investor to interest in their venture, they will ask for the financial records. The reliability of financial reports is essential in building a new partnership and creating a trustworthy impression on the person. Without an internal auditor at a proper auditing system, the financial sheets may become a question mark on your reputation. An auditor helps highlight the areas that are working fine and the areas with room for further improvement. They also ensure accuracy and assesses the risks that might appear due to an error in the sheet.
- MONITORING COST OF CAPITAL
Be it a global company or a small business, the cost of capital holds prime importance. If a company plans to invest or expand its business, they will have to refer to their capital to see for the possibility of executing their plans. If an investor sees a risk in their investment, they might ask for a higher return on the investment from the company. An auditor can prevent or reduce the chances of such risks, including material misstatements, misappropriation of assets, and reports on operations.
- EFFICIENCY OF OPERATIONS
An auditor reviews the policies and procedures of a company and detail and compares if they are fulfilling the legal demands. The assessments of the police and their compliance with legal guidelines indicate efficient operations. In case of any deviation, the auditor will provide insight into the matter. The auditor elaborates on the divergence and how to bring it back on the track with the set guidelines. Continuous monitoring of processes enhances the chances of identification of areas that require improvisation. If you plan for an external audit, these valuable insights by your internal auditor will make your sheets and processes look flawless.
- REGULATION AND COMPLIANCE
Be it a company or a school, every office or a corporate building has to abide by some rules and regulations. Owning a business is easy, but if you do not follow the legal guidelines or align your methods with corporate laws, it will soon collapse. Auditors assess everything happening within the company. They check every paper or bookkeeping records for their accuracy. They monitor the operations and company policies to check if they are working within guidelines. If they see something out of the SOPs, they will provide you a detailed report and assures its compliance.
- A DETAILED OVERVIEW
As a company owner, you might find everything up to the mark. Planning for an internal audit can provide an objective perspective. Once an auditor analyzes everything, they will give you a detailed overview of your company. The report can highlight operations that can save you some finances or incorporate in the operations receiving fewer finances than the required amount. A minor mistake can create significant trouble if not corrected. Audits can help in improving your credit rating by informing you about the financial aspects.
- PROMOTION OF ACCOUNTABILITY
Carrying out internal audits and reports can bring a more positive change in your employees and managers. Knowing that there will be an auditor assessing their sheets and operations will develop a sense of accountability and will make them vigilant in their work. It will help the employees to focus more on dependable accounting and their effective management.
With a professional auditor and robust auditing system, a company has ample information about their business operations. An audit is more like a SWOT analysis informing you about smooth operations and the ones needing your attention. It can also highlight the actions or errors leading to potential risks. You can plan strategies for the procedures that demand a closer look to rectify mistakes and make them smooth. Regular audits of your financial statements not only builds trustworthiness with stakeholder or investors, but it also leaves a positive impact on your reputation in the corporate sector.