Benefits Of Financial Auditing

1. Auditing can be defined as carrying out a formal financial investigation or examination of a firm and its financial statements. During the process of auditing the auditors will go through all of the company’s books and financial statements. He will analyze research and go through all the relevant financial records to ensure that they are accurate and whether taxes are being paid properly.

2. There are various benefits of the auditing process. The benefits of an audit include analyzing and understanding company’s financial records. This in turn helps provide a better and clearer picture of the company’s financial information to its various users. These could be internal as well as external users. Some of these users include shareholder,

Usually it is the management that has more information about the firm. This can lead to an imbalance as the management is in a greater position to manipulate or take advantage of the situation and perhaps not in the firms best interest.
Self-interest of the managers, this is often times one of the most common problems arising from principal-agent relationship. Some examples include using firms resources for personal benefit, avoiding positions of high risk even if the outcome would be beneficial to the firm and thereby the owners.
Moral hazard where the agent acts in a manner that is inappropriate or inefficient, simply because of information asymmetries.
Opportunity Costs take place when the principle has imposed restrictions on decision making or restraints the scope of action of the agent. This can lead the agent to be unable to act in the best possible interest of the company. It also burbs creativity as he does not have much control.
Monitoring expenses are those that are incurred to monitor or rather control the agent’s activities. Auditing expenses is one such example. Remuneration, profit sharing, commissions

some of them are listed as below.
Hostility or resistance from management- The employees see auditiors as highly authorized persons who will be investigate and scrutinize every aspect of their work. Hence this results in some amounts of hostility and resistance from the employees.The auditor needs to work with the employees as they provide them the various documents and evidence required. This negative perception of the auditors can hinder the relationsip between the employee and the auditor and hence affect the auditors work.

Limited Time – The auditors have very limited time in every organization to complete the auditing process. Moreover they have a lot to be done and very less time. They need to analyse all the financial statements of the firm within a very limited time span. This is a very tedious task and puts a lot of pressure on