A company’s success is directly proportional to how well its finances are managed. Beyond possibilities of failing to turn a profit, refusing to meet certain financial requirements as stipulated by South African law is a sure-fire way of putting one’s company under the keen scrutiny of regulating bodies. Furthermore, more severe consequences of non-compliance to financial legislation may include hefty fines and operation closures.
Because of the immense risks associated with poor financial management, it is essential that business owners seek out the most effective and efficient methods of administering proper financial management. One of the most popular ways of doing so is sourcing third-party assistance, and in this article, we will discuss the role of an external auditor and propose an argument for why you should seek the services of one.
An audit refers to the examination of a company’s financial statements and other financial information. A South African financial audit is done in accordance with prescribed auditing standards as outlined in the Auditing Profession Act No. 26 of 2005. Auditing is a process whereby financial statements are assessed with the purpose of providing an opinion on their fairness as well as compliance with proper reporting systems. Furthermore, other financial information is prepared, according to stipulated criteria, with the intention of advising on said information. External auditing refers to the independent contraction of an accountant or accounting service to facilitate the objective examination of these financial records.
External auditors are contracted to assess the accuracy of a company’s financial statements and records. They are responsible for examining all financial operations and provide guidance on how a company can legally align their finances to comply with all relevant legislation. External auditors are tasked with finding discrepancies across all reports, whether being contracted since a company’s formation or brought in for consultation purposes during a business year.
Internal and external auditing, although serving the same purpose, are very different approaches to accounting that offer distinct benefits and disadvantages. We already understand that external auditing refers to the assistance of third-party accountants to analyse financial statements. Internal auditing, on the other hand, refers to the process of financial examination conducted by a group of accountants employed by the company that they are examining. The problem with this type of auditing is that auditors cannot be completely objective as they have a stake in the company’s success. Furthermore, internal auditors may breeze over financial reports and miss small problems as they have larger roles and responsibilities within the business. There are benefits to having an internal auditing team. After all, they will know the ins and outs of your business operations. Alas, there are too many points in favour of hiring an external auditor that we will discuss below.
As external auditors provide a more objective opinion than internal auditors, companies receive the benefit of unbiased accounting services. This ensures that reports are as accurate as possible and potential mismanagement is minimized. This benefit also includes the fact that external auditing boosts a businesses credibility. External auditors are responsible for locating minor financial problems, which allows them to find management solutions before major issues find their way into a company’s finances. This reduces the risk potential of non-compliance with legislation. External auditors can also offer an array of beneficial advice, from ways to reduce waste to methods of improving efficiency. MBS offers extensive accounting services and our Registered Auditors are equipped with the skills needed to provide superior auditing solutions for your company. Whether you wish to have a consultation or get the auditing ball rolling, this expertise will help guide professional financial management for your business.
External auditing involves the assistance of third-party accountants responsible for assessing a company’s financial statements and information to provide guidance on compliance as well as methods for improving profit returns. Sourcing an external auditor is beneficial as they provide an objective and unbiased opinion, helping businesses achieve credibility and transparency that supports their stance in the eyes of legal bodies. There is a lot to be said about the benefits of external auditing and you may enjoy these perks with MBS.