The Price of not Auditing Ethics in an Organization

The Price of not Auditing Ethics in an Organization

Introduction

Auditing is defined as a systematic and organized evaluation of financial data and other aspects related to an individual, organization and entity and government. Audit is the only way top determine the internal information of a company. All organizations are liable to publish their annual auditors report to educate the investors about the company and its overall performance. There are different firms that are present in the business environment that conduct audit of a company and issue their opinion about the information and overall status of the company. It is the responsibility of an auditing firm and the auditors associated with the firm to evaluate the information provided by the management of the company. These auditing firms are also known as statutory auditors or external auditors. There are certain provisions that guide the functioning and responsibilities of auditors in different situations (Kagermann, 2007).

Discussion

Every organization requires a proper consolidated financial statement by the end of the financial year end. There are thousands of transactions during the year and at many occasions there are some blunders, frauds, errors and mistakes which usually happen within the workplace or outside the premises related to the organizations assets, liabilities and capital (Owolabi, 2005).With the help of auditing, an organization can have all its financial statements amended with true and fair view. An organization can gain many benefits from auditing its financial statement because audits improve the organization's efficiency and profitability by helping the management better understand their own working and financial systems. The major benefits gained from auditing are:

Third parties who do not take part in the running of the business are protected by the auditor's presence in the business and thus their financial interest will not be at stake.

The audit will serve as a detective and as a preventive measure against errors and fraud in the business.

An audit keeps the client accountant vigilant and up to date because if they are not, the auditor will report and such can be apprehended.

Audited accounts by an independent auditor minimize the chances of dispute among partners in a business e.g. in profit and asset sharing.

In case of admission of a partner, audited accounts will serve as a basis for such admission to determine how much such a partner has to contribute to the existing capital.

In case of a retiring or dead partner, the audited balance sheet and profit and loss account will serve as a basis of determining what is due to the beneficiaries of the deceased and that is due to the retiring partner.

In case of joint stock companies, the shareholders who do not take part in the management are assured by the audited accounts that directors have not taken advantage of their position in the business to defraud them and misuse their money and material assets.

In case of fire and or any other catastrophe, the insurance company will settle the claim of the business on the basis of the ...