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How Does A Growing Company Benefit From Being Audited?

Ammar Nasab



As an external party, you can never only rely on a company's internal information or financial statements generated by management. A corporation can ask an auditor to verify its financial statements are accurate by conducting an audit of financial statements and issuing an auditor's opinion on the financial statements (give an accurate and fair view).

An audit of a company's financial records conducted by a CPA (certified public auditor) can also be considered an evaluation of the business's overall success. Preparing financial statements is based on (various) management assumptions and (specific) accounting principles and guidelines. An auditor will provide critical analysis of this data in light of generally accepted accounting principles and standards in the country or worldwide, such as International Financial Reporting Standards (IFRS), so that the data may be compared across jurisdictions.

How Does an Audit Report Work?


When a firm releases its financial statements, it typically includes an auditor's report that provides their professional opinion on whether or not the Company followed generally accepted accounting principles. When a public firm reports its financial results to the Securities and Exchange Commission, it must also submit an audit report (SEC).

A report from an independent auditor does not indicate whether or not a company is a suitable investment. The audit also does not include commentary on the Company's financial results within the time frame covered. Instead, the report provides a gauge of the financial statements' credibility.

Benefits of Being Audited


An external auditor should audit accounts or financial statements for various reasons. These are the most significant benefits of an audit are as follows:


1. Assurance to the Investors/Owners

Assuring owners, investors, shareholders, etc., is one of the auditing's primary benefits. The company's owners will rest easy knowing their books are in order. All of their departments will be running well, and the company as a whole will be making a profit. The same holds for investors, who may rest easy knowing the records have been audited.

2. Frauds and Mistakes

An error is a blunder made without any malicious intent toward the business. However, fraud is an intentional act. In the course of an audit, mistakes and dishonesty will be uncovered. Errors and frauds like these are easier to avoid, thanks to auditing. As a result, people become warier about being detected. Indeed, auditing does not guarantee error- and fraud-free books of accounts, but it dramatically reduces the likelihood of such things happening. As the fraud is very skillfully concealed, the error can go undetected.

3. Independent Perspective

A company can get an impartial assessment of its financial statements and standing if its auditor is an independent third party. Since he has no vested interest in the outcome, an external auditor's view will be candid and objective after thoroughly examining the records. His word on the accounts' integrity and fairness carry a lot of weight with the business and its backers if he verifies them.

Indeed, auditing does not guarantee error- and fraud-free books of accounts, but it significantly reduces the likelihood of such things happening. As the fraud is very skillfully concealed, the error can go undetected.

4. Morality Check

Another perk of auditing is that it discourages employees and management from cheating or stealing from the business. They're always on the lookout since they know their books will be audited. Any irregularities can be uncovered in such an audit and will be discovered in due time. Employees are more likely to be trustworthy and accountable as a result.

5. Stakeholders Trust

Creditors, investors, banks, debenture holders, etc., can have more faith in the books of account after an audit has been performed. Financial statements get higher trust after being audited by an outside party.

Components of an Audit Report


As required by generally accepted auditing standards, the auditor's letter is formatted in a predictable way (GAAS). Three paragraphs are the standard length for a report.

  • The auditor's and the board of directors' duties are outlined in the first paragraph.

  • The scope is laid forth in the second paragraph, which states that a predetermined body of accepted accounting principles served as the basis for the analysis.

  • The auditor's opinion is presented in paragraph 3.

Another paragraph may detail the findings of an independent audit of a different part of the company's operations, providing the investor with more information. The third paragraph provides the opinion of particular interest to the investor. The auditor's conclusions will determine the nature of the report that is issued.

Why May Your Financial Accounts Need Auditing?


An audit of financial statements is highly recommended for privately held companies with annual revenue of over $1,000,000. Audits are the gold standard for ensuring the accuracy and integrity of a company's financial reports (in all material respects). A trusted third party guarantees this. Accruals such as accounts receivable and accrued liabilities are only reflected in audited financial statements prepared in line with generally accepted accounting principles in the United Arab Emirates. As a result, shareholders and investors can have a clearer picture of the company's financial health.

As an example, here are some of the reasons why business owners and managers choose Ahmad Al Araidi Auditing of Accounts to perform their annual financial statement audits:

  • Financial information about a company must be disclosed to provide light on its health and prospects beyond what can be gleaned from its income statement and balance sheet. It clarifies everything for the board members, users, and other stakeholders.

  • It provides assurance that financial records have been reviewed and tested independently, which can be helpful for management and other parties in fulfilling their financial reporting responsibilities.

  • To be effective, an auditor needs to learn about a company's internal controls and how to assess risk. With this knowledge, the auditor might spot control flaws, offer advice on strengthening management, and suggest measures to lessen the company's exposure to danger.

  • Auditors look at things from a different angle than management and may have suggestions on how to better present financial data and streamline operations.

  • Companies that get their financial records audited may be in a stronger position when it comes time to raise capital.

  • If a prospective purchaser demands financial statements, having them audited lends more confidence to the transaction.

  • Identifying internal control and financial issues before going public can put a company in a stronger position to go public.

  • A firm can utilize the auditor's report to encourage accountability for the managers and staff in the company since an audit raises the value and credibility of the financial statements provided by management, thereby enhancing user confidence in the financial statements. If workers realize that the company is subject to regular audits, they may be more motivated to maintain accurate books and effective management.

  • Having your financials audited is a must if you must satisfy any stipulations, including those imposed by creditors, the board of directors, and a laundry list of government agencies. All of the advantages mentioned above for auditing also apply to these businesses.

The Final Verdict


The companies must audit their financial statements. After conducting audit procedures, the auditor issues an audit report, which can be one of four different types of opinions based on the nature of any significant misrepresentation or misstatement discovered; if no such issues are found, the auditor issues a "clean" report.


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Ahmad Al Araidi Auditing Of Accounts Established in  2015 and our Office Is Located At Business Bay, Dubai, UAE

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