An external audit is an investor requirement before a decision can be made to invest or purchase shares of any given company. It is also required by stakeholders to monitor the financial health of their corporation. High-quality external auditing aims to determine the reliability of a firm’s accounting reports and its transparency of financial reporting.
The demand for high-quality auditing has never been greater than in the time being. Investors, stakeholders, and regulators are all demanding audits. Investors want the comfort of knowing that their investments are protected and the companies they invested in are trustworthy. Stakeholders want assurance that their organizations are operating in an ethical manner and adhering to industry standards, and regulators need assurance that companies are following the law and meeting regulations set forth by the government.
Do corporations need external auditing?
In today’s bumpy economic environment, investors and stakeholders are counting on auditors to keep them informed about their investments and businesses. They need reassurance that the information used by management was accurate at the time of reporting. There are many reasons why your corporation may need to partner up with an independent, experienced, and trusted auditing firm sooner than later.
An external auditing firm can help identify areas where your books or accounting practices are no longer in compliance with new local tax laws and regulations as well as submit recommendations to where changes should be made. Secondly, a company’s financial statements will carry more weight if they’ve been vetted by an external auditor.
Thirdly, external auditing also serves as a means to identify possible fraudulent activity taking place inside your company. External auditors examine bookkeeping records without being affected by personal relationships that may cloud their judgment. Finally, external auditing might find areas where stakeholders could improve their internal controls or automate certain processes to streamline productivity.
What qualities to look for in an external auditor/auditing firm?
Independence: External auditors' decisions and findings shouldn't be affected by any existing personal relationships between the external auditor and stakeholders or investors. The auditor/auditing firm should maintain imparity and avoid being biased. Integrity: External auditors must be reputably compliant with local rules and regulations to provide fair and honest reporting. Confidentiality: External auditors inspect and uncover sensitive information about a business, and shouldn't misuse the audit information for personal gain. Therefore confirming their dedication to a highly confidential experience is of the utmost importance. Objectivity: external auditors' reports and communication with shareholders should be objective, true, and accurate.
Independent auditors bolster confidence in companies’ financial reporting. They are trusted by a wide range of stakeholders, including investors, regulators, and management. Auditors maintain their independence by conducting audits for other audit firms that do not compete with them. So, it’s always advised that both investors and stakeholders make external auditing part of their routine to ensure the financial health of their business or future investments.