In our previous blog we discussed about Audit Exemption for Small Companies in Singapore. In this blog we will discuss the advantages of conducting audit assurance. Business owners should view audit of financial statements as an investment. Even if not required by law, there are numerous advantages of conducting audit assurance.
Before we discuss in detail the benefits of audit, here is a visual summary of the advantages of conducting audit assurance.
There are compelling advantages of conducting audit assurance for both large and small companies to invest in audits:
- Satisfy Stakeholders - Employees, customers, suppliers, shareholders or minority shareholders and other interest groups that the company is accountable to.
- Loan Processing - Bankers require audited accounts for loan processing. Audit enables the companies to comply with banking requirements for covenant.
- Attracts Investors - Potential investors want to review audited accounts for investing or sales purposes;
- Easy Sale and Purchase - Facilitate the purchase and sale of business as the company account is audited.
- Procuring Tenders - Audited accounts will be useful for tendering of both government and private contracts. Audit provides more credible and quality financial information.
- Detect Fraud - Help deter and detect material fraud and error, usually perpetuated by employees.
- Easy Tax Payment - Facilitate the payment of corporate tax, goods and services tax, and other taxes on time and accurately, thereby avoiding interest, penalties and investigations.
- Spin-Off Benefits - Take advantage of the spin-off benefits such as advise on the structure and operations of business from the auditors, and also get updates of latest FRS and relevant changes in Companies Act.
- Good Corporate Governance - Demonstrate good corporate governance and prestige.
Special Reasons Why Smaller Companies Need Audit
- Small companies might prepare their own accounts but often need help in arriving at adjustments, such as obsolete stock, depreciation, bad debt, review of accruals and other provisions.
- The close involvement of the Auditor provides companies with comfort faced with tax and regulatory investigations.
- Small companies get spin-off benefits of an audit. Auditor usually advises on other areas like latest tax changes, GST, account preparation, personnel tax matters, corporate secretarial matters etc.
- Small firms can tap audit firms for miscellaneous functions like valuation, liquidation, replying to income tax queries, etc.
- Annual Audits keeps the accounts department on its “toes’’ as an independent auditor reviews their work and provides feedback to the management. This puts pressure on accounts department to keep accounts up to date, having good documentation, and avoid errors and fraud.
- If the Auditors are involved in the preparation of the statutory accounts on behalf of management, the cost of audit is often affordable for small companies.
A small annual expenditure on audit assurance can bring a number of advantages for both big and small companies. Advantages for conducting audit assurance is manifold for smaller companies as they are new to business and need value added suggestion for maintaining strong financial condition.
If you need more information on audit assurance or audit exemptions, do contact us by filling up the form before.
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