Audits may not be necessary but they are highly recommended. Without audits, a company
runs the risk of missing key information that may lead to detrimental outcomes for the
company. Audits help to ensure that programs, services, policies, and strategies are working as
they should which naturally decreases risks of loss, fraud, and error.
Companies may elect to keep an auditor on staff and payroll (internal auditor) or hire an
independent auditor to perform what is known as an external audit. Ideally, a company has
both an internal and external audit completed which offers extra security in many of the ways
listed above.
Internal auditors have the benefit of knowing the company and its role, procedures, objectives,
and operations. Internal audits help to monitor internal controls of a company which lead to
optimal performance, reduction of irregular transactions, facilitate supervision and monitoring,
maintenance of proper business records, and to measure ongoing performance.
Without an internal audit, the company would not know exactly where to best allocate its
resources. Both internal and external audits lead to the breakdown of information about
spending, department financials, and production and profit. To maximize profit, the company
needs to focus on the areas of business which are working best for that company. This is where
the audit comes in and leads to new strategy via new information and statistics.
External audits offer many of the same benefits; however, an independent audit has some
advantages of its own. External audits can see things “from the outside” and discover weak
spots in a company’s operations by having a fresh and unbiased look at the current operations.
External auditors should perform audits without bias. External auditors come into a company
and can perform the audit without worrying about shareholders or upper management. This
detachment from the company is a notable advantage to an external audit. Fraud, insider deals,
and other corruption are minimized with external audits.
Audits are vital to a company’s health and transparency. Both the company itself and its
shareholders depend on accurate information in order to access business strategy and future
operations.