How does auditing help the company?

Auditing improves the quality of the accounting process and adds value to the company's financial and non financial performance. Auditing helps to improve the reliability of the accounting records of the company so that stakeholders esp. lenders can know the true picture of the financial position of the company.

In response to corporate malfeasance exposed during the scandal-ridden days of the early2000s, followed by market-tightening and stringent regulatory legislation, particularly the Sarbanes-Oxley Act of2002, the internal audit function has assumed a more critical and visible role in the development of many companies.

Moving forward into the second decade of the21st century, the internal auditing profession continues to evolve and adapt to shifts in the economic and regulatory landscape.

“Today, a lot of companies have been in compliance for six or eight years, which means they no longer have to put as much focus on controls testing,” said Audrey A. Gramling, professor in the Coles College of Business at Kennesaw State University and a certified member of the Institute of Internal Auditors (IIA).

Internal auditors now are concentrating on providing oversight in other aspects of company operations. The primary functions of the internal audit unit, whether a single auditor in a small company or a phalanx of certified professionals in a global corporation, are to ensure that financial controls are implemented and working as advertised, and that waste and fraud are minimized. Based on the data gleaned by these tactical functions, internal auditors can also serve as strategic consultants to the C-suite in terms of asset handling and related areas of financial management.

“An internal auditor is working for the board and the CEO or president to provide an independent, objective perspective on various issues that really matter to the organization and its success over the long haul,” said John Fuchko, chief audit officer and associate vice chancellor of internal audit in the University System of Georgia.

Following best practices articulated by the IIA, the leader of the internal audit function, who may assume the title of chief audit executive, reports functionally to the audit committee, members of which are drawn from the board, and administratively to the CEO.

The IIA also strongly recommends creating a strong internal charter, which sets forth the mandate for and defines the purpose, authority, scope and responsibilities of the internal audit function.

Fuchko, who also serves as president of the Atlanta chapter of the IIA, identified three main areas of focus for a successful internal audit function deployment: governance, risk management and controls.

“From a governance perspective, you want to ensure that the company is structured in such a way that goals are realistically achievable and that the right tone at the top is being set, especially regarding ethical behavior,” he said.

According to Fuchko, managing risk requires adhering to performance metrics that drive learning at a realistic pace within the organization.

Investing in an internal audit function delivers returns in a variety of forms. When facing critical operational problems and far-reaching strategic decisions, an objective viewpoint can prove invaluable to a CEO, owner or president.

“Naturally, management cares about these things, too, but they will always be viewing developments through their own perspective,” Fuchko said.

To maintain objectivity, the IIA recommends that internal auditors have no personal or professional involvement with or allegiance to the area of the business being audited, and should maintain an un-biased and impartial mindset in regard to all engagements.

“With objective perspective, deep organizational knowledge and sound audit principles, a strong and independent internal audit function can provide valuable support and assurance to an organization and its oversight bodies,” said Vijay Pinto, director of audit and enterprise risk services at Deloitte & Touche LLP in Atlanta.

“Organizations without an internal audit function lack valuable benefits that internal auditors provide,” Pinto said.

Some experts pointed out that an internal audit function helps to shape a company’s long-term strategy by comprehensively monitoring performance and tracking outcomes. In this way, benchmarks are set by which the potential return on investment not only of programs, but also employees, can be assessed.

“By working across the enterprise, the internal audit group evaluates future initiatives and considers controls and efficiencies at the front end of a project versus the conclusion, which also allows us to identify and develop high-potential employees into future company leaders,” said Randy Early, vice president of audit services at Cox Enterprises Inc.

While the criteria may be malleable and a lawful mandate may not apply in every case, the experts agree that instituting some form of internal audit capability within an organization creates a foundation for successful growth.

Establish an internal audit function

• Meet with existing staff to understand job responsibilities and qualifications.
• Obtain and reviewing staff job descriptions.
• Review audit reports issued for the past year.
• Review any other reports produced on various audit activities.
• Review policies and procedures.
• Meet with internal audit customers within the organization to gain their perspective on the services received.
• Meet with the external auditors to understand whether and how they rely on internal auditing.

Auditing is like a WatchDog.

If we know that no one is going to check our work,why bother doing the right thing !

Hence,Auditing keeps a vigil over a company's policies ,procedures and practices.

Auditing assest in risk management and improve processes

An audit is the examination of Financial statements and provide reasonable assurance regarding the true and fair view of F/S.Auditing the Co's F/S wil help in providing reasonable assurance not only on the F.aspects of the Co but also provide reasonable assurance on the Non-financial aspects for instance decrease in product quality and late payment to suppliers will both have a -ve impact on the Co F/S,This will inturn provide the true picture to the stakeholders of the Co.  

In many ways...

provide validity

discovers errors

limits legal and tax issues

educates business owners

helps in preventing fraud

etc

Simple answer to this question, An audit is an examination of a company's records to determine whether the financial statements prepared by that company are a fair representation of their financial condition.

Companies provide the information that goes into their own financial statements. Whether these financial statements are prepared by the company's in-house accountant or an outside accounting firm, audits are needed to provide assurance to external parties that those financial statements can be relied on when making decisions.

Auditing keeps check on compliances and prevents from financial risks to the company.

Auditing is a practice that allows an independent practionaer to issue an opinion on whether the financila statements of a company present true and fair view of company affairs. External users base their economic decisions on financial statements so it is integral to ensure the financial statements have been prepared in accordance with relevant rules & regualtions and reflect a fair view of company affairs. Now coming back to your main question how auditing helps in bookkeeping, as auditors identify any potential mistakes, manipulations or wrong application of accounting principles and before an unmodified audit report is issued all these errors must be corrected by the entity whose audit is beintg conducted. In this manner even if the staff of the company have done mistakes in bookkeeping they are properly identified and rectified if they reach materiality threshold.  

make a good diagnostic, then the appropriate plan of audit, and you shall collect the appropriate elements to check your assessements, and finally to make the apropriate opinion or reports (it's the main strategy in both external and internal audits). Only after making your opinion, you will be able to say that audit can help the company or not. But by the way, I beleive that most of auditors are lost and that they don't do the appropriate conclusions (lack of knowledges and informations)

i. By providing the desired assurance to the company and its stakeholders on the audited area. However, if no suitable assurance could be obtained then the risk involved along with practical recommendation to mitigate the same will be provided. Hence, this way auditing really helps the company in achieving the desired business objectives.

ii. Mainly financial audits helps in improving the company's book keeping since it will ensure compliance with governing regulations and relevant accounting standards so as to present a true and fair view of financial position of the company.