Why should I audit or keep books of accounts?

As a definition, Accounting can be called the process of recording, classifying, and summarizing a business’s financial operations logically to provide financial information for decision making. Accounting is commonly mentioned as the ‘Language of Business.’ It does not matter if you are a small business or complex organization; keeping track of your financial activities can be a herculean task. By identifying the areas of underperformance and taking proper corrective measures, you can increase your own performance as well as make peer to peer comparisons. Your financial position determines how much credit you will be allowed and at what rates, etc. Investors can get an exact idea of the risk and opportunity in investing in your company. When asked for, proper books of accounts will be required to be submitted to banks while applying for loans or government entities. None the less it is always necessary to know for oneself where his business stands. Keeping your accounts up-to-date will help you in calculating your taxes or claim refunds, if any. As far as FTA is concerned, it can call for historical records up to 5 years behind. And making a mistake while filing your returns is sure to make a hole in your pocket. Know more about the compliances and penalties with FTA click here.

To summarize, you should keep proper books of accounts for

• Evaluation of business performance
• As an aid to prepare financial estimates and budgets
• Keep records in order
• Assist in calculating taxes or claim refund if any
• Discovery and prevention of fraud
• Compliance with government rules and policies

The importance of auditing arises, especially when there are errors in your accounts. An auditor can make a proper finding in uncovering those details. A good auditor will be able to point out your issues and help you improve your company. Conducting regular audits will also instill more confidence in the people you work with, like shareholders, clients, banks, and a government institution. Therefore, audit plays a vital role in providing the stakeholders with an objective view of how well the business understands the risks it faces and how efficiently it handles them. 

Audits are performed to ensure that financial statements are prepared by the relevant accounting standards, such as International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). The three

Financial statements provide an overview of the operating, investing, and financing activities of a company through various transactions that have been recorded while bookkeeping. Auditing is crucial to ensure that the companies present the financial position accurately and adequately by accounting standards. The auditor’s responsibility is to plan and perform the audit and confirm if the financial statements are free of information that might have crept into by wrong judgment or fraud. Because the comments might have been prepared internally, there are high chances of fraud or misrepresentation being pictured. The advice by way of providing the audit report will help your concern take corrective measures of avoiding risk and saving costs. Thus, it is a natural and necessary part of any organization to conduct an audit regularly. The auditor’s role is a reflection of the needs and expectations of the organization as a whole.

The key reasons why your concern should be audited are:

• Ascertain and protect the asset of the company
• Establish accountability
• Improve the operations of the concern
• Minimize fraud
• Ensure financial reliability
• Ensure compliance with statutory regulations and laws
• A complete report of the company’s position
• Improve Credit Rating

To conclude, it is always advisable to have regular audits of your financial statements for your concern. A recent client of ours approached us of preparing books of accounts for the past 15 years as they wanted to hand over their family business to the next generation and wanted to have an idea of what and where they stand! The earlier you start, the more beneficial it is to plan and grow your business on the right path. Audits will help you track and solve any internal issues and will help you gain the confidence of your investors, stakeholders, banks, and tax officials. As a bonus, you get your peace of mind!

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