The idea of being audited is enough to make anyone cringe. Auditors have long been seen as a company’s worst enemy, causing hassles and slowing work. However, at long last, that reputation is changing. Auditors are now and will continue to become more important in the business world, and here are five reasons why:
5. Increase productivity and efficiency: An audit provides performance data that can identify points of needed improvement, not only in following regulations, but in levels of productivity and efficiency as well. Activity-based costing is just one method used to identify inefficiencies and weaknesses. It allows management a company wide overview of the costs of each process and output down to each specific department, allowing companies to pinpoint problem areas. Ultimately saving business money!
4. Gives management an in depth view of how their policies are followed: Audits can identify short-falls between performance and best practice standards. Finding what meets standards is possible first by looking at management documentation system and making sure that that system is operational, and secondly by observing those processes, and checking on the implementation and effectiveness of those systems. This allows management to see how the practices they've put into place are being used and followed.
3. Auditors provide feedback: Being audited is no longer just about a pass/fail result. More and more companies are raising their expectations and getting more back from their auditors. With a wide range of exposure to varying business practices, auditors can provide a unique perspective on opportunities for improvement. As they perform their audits they are not just looking for accounting errors, they look at the way things are being done in a broad perspective. That perspective gives them the opportunity to point out tricks of the trade that may be practiced by one company that could help out another. Ultimately making the company run more smoothly, and making their own job easier the next time around.
2. Preserve public confidence: The primary reason that auditing was put into place by the Securities act in 1933 was to ensure public confidence in publicly traded institutions and it serves that same purpose to this day. Regular auditing proves to share-holders, board members, government agencies, and the general public that a company is doing what is says it is doing, and doing it in the way that it should be done and is an important element in gaining the trust of the public.
1. Catching fraud: Auditing is second only to insider whistle-blowing at identifying fraudulent activities. It is a solid method for ensuring that people keep doing what they are suppose to. The good news is, if you haven't done anything wrong, you have nothing to fear. So the next time you're auditors stops by, be sure to give them a big smile, and remember why they are a crucial part of a smooth running corporation!