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Why you need an Auditor

 Published  Articles

Most Entrepreneurs have always question the need for auditors. They opined that the essential need of an organization is cash, that if they can get cash without an auditors input from the bank and investors then audit is only a want and not a need. However, with the law requiring that every company should file an audited accounts with the revenue service then they are forced to get the service of an auditor. 

Small and Medium scale business owners believes that if not for the need to file Account with the revenue service the auditors service may not be required. In Nigeria today many of this small business owners are even seeking means of filing the account with the Revenue service without necessarily doing a proper audit. This is to the extent that many business owners or Entrepreneurs detest engaging an auditor. 

The BIG questions?

What really does an auditor do?

Is an auditors service not just an imposition of the law?

What does an auditor has to offer?

What really does an auditor do?

Traditionally, the auditor is a professional licensed to perform a financial statement audit. According to International Auditing and Assurance Standard Board (IAASB) through the ISA 200 defines audit – “An audit of financial statements is an assurance engagement. The auditor is engaged for purposes of expressing an opinion designed to enhance the degree of confidence of intended users in the financial statements. As a basis for the opinion, the auditor obtains reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error” 

The auditor performs this role traditionally, but their role has gone beyond this traditional role due to the experiences and training they have been exposed to in the cause of performing their work. 

The example of this startup company below helps to amplify the role of an auditor.

A startup company who deals in production of water and bread after operating for about 10 months the Director decided to engage an auditor in the face of several business challenges. The Auditor was engaged to audit the books as prepared by the Accountant because the Director was not sure of the accuracy of the report that was delivered to him. The auditor finds out critical issues as follows:

1. The excel application that is being used to capture the transaction is manual and susceptible to errors and omissions. 

2. The receivables position was totally wrong due to the manual approach. Also, loss of money was detected which resulted from the gaps in control and record keeping.

3. The company’s working capital has been eroded. This was revealed from the ratio analysis. 

4. It was revealed that the company was selling bread at a loss, the costing procedure done internally was faulty.

5. The company was actually in a loss position as against the profit position presented by the Accountant. 

6. Misappropriation in stock management.

This were among many issues brought up by the Auditor. The Director was surprised by the discovery because the manager was a trusted hand and he also supervise some of the activities by himself. Under their watch money have been lost and the entire system they have built by their collective wealth of experience was revealed to be inadequate and not meeting standard practice.

From the above example the need for an auditor is clear.

What does an auditor has to offer?

1. The Auditor is your most reliable partner in setting up your accounting system.

2. The Auditor will show you the competence level of your Accountant.

3. The Auditor will reveal critical business errors and omissions to guide management decisions.

4. The Auditor will help to reveal internal control weaknesses and recommend procedures to strengthen it. 

5. The Auditor helps to reveal the actual financial performance and position an organization.

6. The auditor will help to guide against fraud and/or misappropriation in the system. 

7. The auditor provides analysis and ratios that assist management in understanding the financial statement and advice on strategic and precautionary measure.

8. The Auditor provides the base to establishing corporate governance in an organization. 

9. The Auditor helps to create a compliance atmosphere in an organization.

10. The Auditor adds value to the company’s brand positioning. 

As you can see from this list, the need for an auditor is far beyond the traditional role of expressing opinion. They are strategic partners to the success of any organization. Large and multinational companies don’t play down on the role of auditors because they understand that they operate in the capacity of a medical doctor. As human beings cannot do without the input of a medical doctor, no organization can continue to exist in good health without an auditor. 

Small and medium enterprises must come to terms with this reality in other to build a company that will stand the test of time. The role of an auditor is not an imposition of the law rather it is a necessity to remain healthy as an organization. 

Now you know why you need an auditor. Quickly call and contact an auditor now @ SO&C Compliance Service.

info@soccompliance.com

08033218623, 08174598142.

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