Why Does Your Company Need an External Audit?

Today, many companies think that conducting an external audit once a year is a legal requirement. However, most business experts agree that the real value of the auditing process is far greater than simply fulfilling a legal obligation.

Today, many organizations operate at a loss but assume they are in profit, mainly due to the unavailability of correct financial information or improper maintenance of books of accounts. No doubt, auditing is a vital success factor for any business. It reveals the real financial status of a business. How can you be sure that your accounting process is functioning correctly?

The answer is simple: you need independent, unbiased, and professionally qualified experts to verify and confirm your accounting process and the success of your organization. These experts are known as external auditors.

What is External Auditing?

External auditing refers to the process of examining a company’s records and operations to ensure that financial statements are accurate. External auditors are independent accountants who work separately from the company, often through specialized “audit firms.”

They play a key role in establishing your small business’s credibility and ensuring compliance with relevant laws. Furthermore, external auditors confirm that an organization’s claims about its financial position, profitability, and the processes behind these claims are true and fair.

Benefits of an External Audit

1. Government Compliance and Audit Reports

An audit report is required for many legal and general purposes by both government and non-government organizations across the UAE.

The audit report is essential for many government institutions and companies in industries such as oil, gas, and construction. Many organizations, including consultants and contractors, need auditing services for classification purposes. Additionally, an audit report is required for the annual trade license renewal for many companies.

If your company fails to conduct proper auditing each year, you may harm your company’s reputation and miss out on business opportunities in the UAE.

Furthermore, the UAE government plans to introduce VAT Tax from 2018, making it even more crucial for businesses to maintain accurate financial records to comply with tax laws.

2. Provides Credibility Through External Auditing

Your financial statements will carry more credibility when an external audit is performed. Credibility is especially vital for small businesses in their early stages when they are trying to build a solid reputation.

For instance, the audit report is a critical requirement for banks and financial institutions when applying for loans or financing.

3. Re-verification of Financial Information

Occasionally, you might receive financial statements from your accountant, but how do you know if these numbers are accurate and reliable?

To ensure your financial information is correct, you need the assistance of independent professionals. External auditors will examine your financial records to determine whether your business is genuinely profitable or not.

4. Fraud Prevention Through Auditing

Although it may be uncomfortable to consider that fraud could be happening within your organization, it’s better to know for sure than to wonder continuously. Fraudsters are often the least suspicious individuals, making it difficult to identify them.

External auditors provide an impartial review of bookkeeping records, allowing them to detect fraudulent activities. Their unbiased inspection can prevent major losses and ensure your business remains secure.

5. Expertise in Auditing for Business Growth

Many small businesses cannot afford to hire certified public accountants to manage their day-to-day financial operations. By engaging an external audit firm, you can verify your financials and gain insights into how to improve your processes.

An external audit can identify areas where you can improve cash flow, reduce debt-service interest, increase deductions, or implement other strategies that will enhance your financial performance.

Benefactors of External Auditing

1. Owners and Shareholders

In many cases, owners and shareholders may not be directly involved in daily operations. Therefore, an external audit is valuable to them as it provides a trusted second opinion on the organization’s financial statements and offers insights into how well the business is being managed.

2. Accountants and Finance Directors

Accountants and finance directors are responsible for ensuring the proper management of a company’s finances. Receiving an opinion from independent, professionally qualified experts is essential for identifying and rectifying mistakes.

They value working with external auditors, as they provide expert advice, solve complex accounting issues, and help keep them updated on the latest regulations and best practices.

Conclusion: Why External Auditing is Essential for Your Business

It is clear that appointing an external auditor is crucial for any company. It enhances profitability and ensures that your company’s financial processes are functioning optimally.

Why Parker Russell UAE?

1. Professionally Qualified and Experienced Auditors

Parker Russell UAE employs only professionally qualified auditors, including Chartered Accountants, Chartered Certified Accountants, Certified Public Accountants, or their equivalent professional credentials.

2. Vast Industry Experience in Auditing

With nearly 20 years of experience, Parker Russell UAE has expertise across various sectors, ensuring your audit is comprehensive and reliable.

3. Cost-Effective Auditing Services

Our auditing services are affordable and tailored to meet the needs of businesses of all sizes.

4. Compliance with International Standards

As a member of Parker Russell International, a UK-based international audit firm, we offer diverse technical skills, advice, and assistance. Periodic inspections ensure the quality of audits conducted by Parker Russell UAE, maintaining the highest international standards