Auditing is the independent examination of financial statements or any other subject matter in order to give the assurance that the financial statement complies with the acceptable financial reporting framework
In many countries, auditing is mandatory to companies listed on the stock exchange authorities and is required by many banks when companies are seeking loans
The following is the importance of auditing to the economy of any country
it increase the faith of investors who want to invest in companies
Auditing provides reasonable assurance to the users of financial statements that the financial statements have no material misstatement which can lead to the wrong decision to the user.
One of the key users of financial statements are investors who want to invest their capital in companies.
When investors know that the independent third party (auditor) have given an unqualified opinion on the financial statement then they will easily be convinced to invest their money in the company
Auditing help companies to seek loans from money lenders
To be sure of the company’s transactions and financial position banks require the companies who seek loans from them to submit the audited financial statements.
Through audited financial statements the lenders are able to know the assets and liabilities of the companies.
Auditing helps the companies to improve their processes and increase efficiency
Through auditing, auditors test internal controls and when they find a weakness in the internal control they provide a recommendation that rectifies or removes the weakness.
Internal controls help the company to achieve its objectives by minimizing the risk associated with achieving the objectives.