IMPORTANCE OF COMPANY BEING Audited
Why Should a Company being Audited?
What is an audit? Why do private companies need to be audited? What will be the benefits to the private companies if they have audits?
According to the Company Act 2016, a private company shall appoint an auditor for each financial year of the company. It means that all the private limited company (Sdn Bhd) need to have their accounting records audited each year. It is compulsory for them to appoint or outsource an auditor to audit their companies.
Audit is a process of certifying and obtaining the confidence of the financial statements and the accounts. It ensures and certifies the financial statements of the company which comply with the Companies Act 2016 and the accounting standard. Audit reports consist of the conclusions for each component of whether they are in compliance with the Act or Standard and the comments of the auditor to this financial statement.
Sdn Bhd needs to have an audit because it protects and secures the users of the financial statement and company shareholders’ interest. It prevents any fraudulent information in the financial statement that may affect the users of the financial statement to make their decision. However, there is exemption for SME on the audit of financial statements, but they still wish to have an audit. This is because they are confident in their financial statement which is able to be audited by an external auditor.
How to Appoint an Auditor?
Company should appoint an approved auditor in Malaysia which is a member of Malaysian Institute of Accountants (MIA) and he/she must obtain approval from the Ministry of Finance (MoF) to practice as auditors in Malaysia.
Importance of Audit Report
A company with an audit report can increase the confidence of customers in your company. This is because the audit report provides information about the company’s financial management, thoughts of the top management, operational performance of the company and financial health of the company. With the audit report, the information in the financial report will raise confidence for the user. Customers will feel more confident for the company with an audit report which will result in higher sales for your company.
From the supplier’s perspective, a company with an audit report will enhance the confidence of the supplier to the company. It may benefit the company in extending the payables period which allows the company to have more additional time to utilize their resources for other operating activities. Also, companies will be able to borrow loans from the bank because the bank prefers to examine audit reports that are certified by the auditor.
Values of Auditing for the Company
Reduction in the interest rate mainly due to the audited report is certified or verified by the professional auditor. Banks will prefer an audited report to analyze the repayment ability of the company and it is more secure compared to unaudited financial reports. The risk is lower to the bank, which results in a lower interest rate for the loan. It also can become a bargaining chip for the company to increase the loan amount.
Inquiry about Internal Management of the Company
There is risk management of the company in the audit process. It allows us to determine whether the company has developed sufficient arrangements to provide an effective operational management tool. Audited reports allow us to show whether the risk management arrangement is well-developed. It allows to improve internal control management and the operating process.
An audit can help the company to ensure all the financial statements are correct and complete. It allows the company to ensure compliance with the accounting standard and the regulation. Also, audit can effectively prevent any money laundering, fraudulent and any illegal activities to occur in the company. Company with the audit report will indicate that the company is clean without these illegal activities.
Audit report provides comprehensive financial information to the top management and other stakeholders. They can use the financial information in the audit report to make more accurate financial decisions which are beneficial to the company. Based on this, companies can establish better solutions and policies that reduce the cost of the company. Other than top management, stockholders can make reference from the audit reports to make better investment decisions which will attract more to the company who have audited report.
Why AL Account Management?
Why AL Account Management？
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