Companies engage an audit for a number of reasons. Larger companies are required to audit as required by law, but many companies will consider audit even if there are no statutory obligation. An independent audit is crucial to good corporate governance and essential to an effective internal financial control function.
Above all, an audit adds credibility to information provided to shareholders. It provides assurance to investors and other providers of finance who are able to make their decisions in a safe environment with confidence. Safety and confidence reduce the cost of capital and make companies competitive and profitable.
Companies invest in an audit in order to:
- Satisfy stakeholders such as employees, customers, suppliers and group, as well as the investing community, as to the credibility of published information
- Facilitate the payment of corporate tax, goods and services tax (GST), and other taxes on time and accurately, thereby avoiding interest, penalties and investigations
- Comply with banking covenants
- Help deter and detect material fraud and error
- Facilitate the purchase and sale of businesses
- Take advantage of the spin-off benefits such as advice on the structure and operations of systems
- Demonstrate good corporate governance