Why an Organization Needs Financial Audit, Research Paper Example

A financial audit is of importance to the organization since it identifies to management their areas of weakness. As a result, a qualified accountant completes gain fair perspective on company’s statements after analysis. Therefore, they will be in a better position of making evaluations on productivity and profitability of various departments in the organization. This is important because accountability by management is fixed on improving their poor performing sectors and inefficiency of staff members (Kumar and Sharma 377).

Additionally, the organization detects fraudulent acts and errors made by employees and hence, protects the public sector from corrupt dealings, since accountability is promoted. Consequently, errors detected when conducting financial audits help organizations follow certain standards (Johnstone, Gramling and Rittenberg 23). For companies listed under the public sector, a financial audit ensures that policies set by regulation are fair and safe hands handle the public’s finances.

Financial auditing is important when it comes to loans and expansion of business activities. The exercise is easy because lender trust and accept audited records and thus, grant the loan since borrowers’ reputation increases. Financial auditing gives auditors a chance to promote honesty among its employees. In addition, pending work is discouraged, which reduced the chances of errors and frauds taking place (Johnstone, Gramling and Rittenberg 40). When it comes to tax, payment and owners have an easy task of just presenting the audited documents to government officials. This reduces inquiries or investigations and business people become less worried.

In conclusion, any organization needs to have a financial audit performed because it is important, promotes, and improves the economy, efficiency and production of the organization. The management also takes up the challenge of upholding policies and standards of the organization. From the auditors desk, management seek advise on their weak areas and gear towards improving their poor performing areas to meet the needs and preference of their customers.

Works Cited

Johnstone, Karla, Gramling, Audrey and Rittenberg. Larry E. Auditing. New York: Cengage Learning, 2011. Print.

Kumar, Ravinder and Sharma, Virender. Auditing: Principles and Practice. New York: PHI Learning Pvt. Ltd., 2006. Print.