Auditing Advantages Disadvantages

Auditing is a work of precision and accountability. It provides vision and foundation to a business, by giving the following advantages:

1. Transparency and the big picture: Audited accounts allows to reveal that the Profit and Loss Account and record of the business shows a real and honest read of the state of affairs of the business.

2. Detection and interference of Errors and Frauds: once books of accounts square measure audited, errors and frauds are often detected and necessary action is often taken to forestall it.

3. Third-person view: Auditors possess a knowledgeable outlook to produce an expert recommendation to the corporate on varied aspects like tax matters, internal check, control and submission of varied reports.

4. Helps in partitioning Disputes: Audited accounts provide a basis for sinking disputes and conflicts among the partners within the case of partnership firm and to settle disputes with relation to bonus, wages, etc. within the case of corporations.

5.Claim settlement: associate insurance underwriter settles claims to the businesses for the loss because of harm of business property solely on the premise of audited accounts. Audited accounts square measure relied upon for the aim of decision-making by the management. For the settlement of insurance claims, insurance corporations will consider audited accounts.

6. Helps in getting Loan: Loans are often simply borrowed from banks and alternative monetary establishments on the premise of audited accounts because the audited accounts evidence the honesty of the books of accounts and monetary statements.

7. Helps to work out Future Trends: By comparison, the audited accounts with past years, the trend of economic activities are often determined. On the premise of review, weaknesses square measure observed and policies for the longer-term amount are often determined. Audit of business on an everyday basis will increase confidence to the interested parties and general public, as result goodwill of the business is often increased.

8. advantages to the only Proprietors: Audited accounts give assurance to the businessman concerning the accuracy of accounts maintained by his workers and additionally allows us to grasp the monetary performance of the business. It more allows the businessman to get a loan and in the computation of tax liability.

9. profit to the Partners: just in case of the partnership business, audited accounts facilitate the partners in settlement of accounts among the partners at the time of admission, retirement or within the case of death of a partner.

10. Bank and monetary Institutions: Banks and alternative monetary establishments grant the loan to the business on the premise of audited monetary statements.

11.Prospective Investors: Prospective investors United Nations agency would like to speculate cash in shares and debentures of a corporation consider audited accounts.



The major risk of auditing is the derivation of wrong conclusions. Some of the disadvantages of an audit are:

  • Evidences: The wrong shreds of evidence can create the issue in the future, the submission of audited accounts makes major changes in the accounts of profits.
  • The fraud chances: The result of the audit program is credential, then chances are more of getting the situations where an auditor or staff may be forced to commit a crime or can try to manipulate the credentials. It even harries the auditors to crime after the audit program.
  • Small businesses: In small scale industries, the transactions are completed within a shorter period of time, in these cases, the auditing is not required.

  • Problems in collected data: The auditors are forced to change the data or show the wrong credentials to the law authority. The auditors are tried to bribe for manipulating the secret information.
  • The Independent Auditor: The small businesses hire independent auditors sometimes, who don’t know about the financial records of the company. The auditor in pressure can make mistakes or the data for him can be really complex to handle.
  • Lack of knowledge: When the auditor does not have knowledge about organization or business, it can make the wrong decisions and accept the wrong credentials unknowingly.
  • Expensive: The continuous audit can be expensive, arranging everything differently at every audit results in higher expenditure. A continuous audit involves time, hard work, new ideas, money, etc.
  • Continuity of work: With the continuous audit the continuity of work is lost. The auditors lose the threads of work, they may forget the queries and results of the previous audit. Therefore, the continuous audit harms the work of auditors.
  • Unhealthy Relationship: The Frequent visit of audit staff to the entity or company’s staff, the unhealthy relationship might get established between two. Hence, the audit should not be done frequently or the client or staff should not be visited frequently.
  • Insufficient consideration: The lack of proper information may result in the wrong result, resulting in the wrong decision made by law authority. The client will be punished for no reason or will pay a high amount as TAX to the authority.

The result of the audit program is not guaranteed, it is not sure that an audit will give the result, it might end up without any correct finding.

Auditing has advantages but on the other side, it has constraints too that should be kept in mind.

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