A clear understanding of your company’s financial statements is essential to maintaining investor and regulator confidence. With inaccurate financial statements, attempting to develop a strategy that ensures higher profitability and growth is near impossible.
But finding approved auditors in Dubai who go above and beyond expectations is no simple feat.
Fortunately, long-established independent auditing and accounting firms know what competencies external auditors require to ensure an organization’s success, and they share valuable insights below.
Why does your business need an external auditor?
Today’s more robust regulatory climate requires companies to be able to analyze their accounting processes and financial information with impartiality. While in-house finance personnel are capable of testing their company’s accounting information, their personal investment in the organization can lead to biases. They also find it difficult to keep up with the ever-changing accounting standards and disclosures.
By using external auditing services, your organization can be assured of an objective opinion of your company’s financial statements. This impartiality reinforces the credibility of your organization’s general financial health.
Benefits of using external auditing services
At first glance, an external audit may appear as an unnecessary expense. An external audit involves a cost for a privately held organization. However, more and more government and regulatory bodies require that audited financial statements be submitted at the time of renewal of a business’s trade license. If an entity has borrowed working capital funds or availed loans from a bank or financial institution, they will also insist on audited financial statements at least once each year. In some instances, a business may get away without getting an audit performed, but is getting rarer with each passing year.
An external review offers an opportunity to make informed financial decisions about your company’s future.
If you believe your company’s financial health to be in good shape, an external auditor will confirm and validate this notion. Likewise, external audits will provide an accurate and fair view of your organization’s financial performance and position.
Want to see the other benefits that external auditing brings to your organization?
1. Validates your company’s accounting information
The objective overview provided by an external auditing firm will lend credibility to your company’s financial health. For family-owned businesses, this credibility assures prospective lenders as well as potential investors looking to support your business with external investment.
An independent review of financial accounts can also validate decisions made by an executive-level manager, confirming to shareholders that the business continues to be able to achieve its desired goals.
2. Maintains compliance
As briefly touched on, inaccurate financial accounts can result in compliance deficiencies. Businesses that report incorrect financial information can quickly find themselves in violation, which can result in financial penalties, legal issues, and even dissolution.
With the responsibilities of running the business squarely on their shoulders, business owners of privately held companies are often unable to properly dedicate the time to review their accounting information, let alone perform periodic reviews.
Audit conducted by external auditors can quickly identify where financial compliance may be lacking. After identifying areas of improvement, external auditors can continue to perform periodic reviews to confirm that your business remains in good standing.
3. Determines the effectiveness of internal controls
A review of the internal controls of a business conducted by an external audit service will enable your business to determine if the right approval and authority checks are in place.
And because they are not a part of your organization, external auditors can impartially critique your internal processes, determining areas of your business, from accounting to general operations, which can benefit from greater efficiency.
This can help determine which areas and processes could be better streamlined to reduce waste and inefficiencies and mitigate risks which may exist.
4. Helps companies become less vulnerable to fraud
When tasked with analyzing your company’s financial information, an external auditor will perform a thorough analysis of your company’s accounting processes to unearth any potential vulnerabilities such as fraud or embezzlement.
An experienced auditor will be able to evaluate the risk of fraud and develop systematic procedures that recognize fraud indicators, better than business owners can. This allows your company to employ more efficient anti-fraud mechanisms that uncover any material discrepancies.
And because external auditors are solely focused on the betterment of your company’s financials and have no stake in the outcome of the audit, they can quickly identify any financial misstatements which may result in fraud.
5. Enables better management decisions
External auditors can also perform operational reviews that enable your organization to identify best practices for improvement opportunities and competitive advances. By gathering performance data and gaps in programs or services, your business is better prepared to develop a strategic approach that delivers on value and drives better performance.
Your organization can also use operational reviews to highlight any outdated policies and ineffective processes throughout your company’s supply chain. Identifying such problem areas ensures that the corrective action(s) can be initiated, increasing efficiencies.
While external audit services are undoubtedly an expense, in today’s highly competitive marketplace, they’re an essential requirement.
External audits provide your organization with a holistic overview of your company’s overall financial health. By highlighting potential bottlenecks and critically assessing your organization’s accounting processes, errors can be quickly identified and solutions can be developed.
This results in your organization being able to make informed decisions that can further improve the overall operations of your business. Even if your business has an internal accounting department, working with external auditors can ensure that compliance is assured and your company’s financial information is validated.