The importance of auditing is demonstrated because even organizations that are not subject to the Companies Act have their financial statements audited. Every commercial and even non-commercial organization now requires it. The following points sum up the significance of auditing:
1. Accounts that have been audited might assist a lone trader in determining the value of their business for selling.
2. Disputes regarding profit accuracy can be avoided.
3. Shareholders unaware of the company's day-to-day operations can assess management's performance based on audited financial statements.
4. It aids in the detection and prevention of errors and fraud by management.
5. The auditors provide advice to management on financial matters.
6. When granting credit to businesses, both long and short-term creditors rely on audited financial statements.
7. In determining a company's income tax, sales tax, and wealth tax due, taxing authorities rely on audited financial records.
8. The government can use audited accounts when giving subsidies and other benefits.
9. It can be utilized by insurance firms to settle claims resulting from fire damage.
10. In the event of a merger or absorption, audited financial statements are used to calculate the acquisition value.
11. It protects worker's interests because audited accounting can be used to settle trade disputes over more excellent wages or bonuses.