AUDIT enhances capital market credibility

Financial audits have many uses to a company like; 
* Improve controls & processes due to the auditor focussing on design and operating effectiveness of controls,
* Develop proper accounting methodology for estimating values and making judgments on matters relating to fair values, 
* Avoid bad accounting practices due to knowledge shared by the auditor,
* Help in establishing a good track record for financial governance,  
* Use the audit partners as a critical sounding board to get a better insight into critical issues affecting CEOs and CFOs. 

In addition AUDITs also enhance the credibility of companies. If carried out with little interference from management it tells the world that an independent party has reviewed what the company has prepared and concurs that the financial statements provide a true & fair view. Truth depends on the truthful representation by management of all facts & circumstances leading to the preparation of the statements and Fair depends on the extent of verifications performed to concur with the final product. The latter comes down to making sure you select the right auditor at the right price which allows them to do the right job.

By enhancing credibility companies are able to get better ratings and reduce their cost of capital. This is also a direct benefit of an AUDIT. Therefore, whilst companies enjoy listing on Stock Exchanges and enjoying low cost of capital, they should stop complaining about audits and incur the cost of getting a good AUDIT done. If all companies accept the value of AUDIT that contributes to the credibility of the Capital Market.


About surenraj

“Views expressed are my own”
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