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Top 39 Advantages and Disadvantages of Auditing


What is Auditing?

Auditing refers to the periodic examination of accounts, documents, and vouchers in a corporate world. This financial certainty will help people understand the ascertained workplace. Here the vouchers and accounts cannot fulfill.

Auditing will take place in both the corporate and public sectors. It recognizes all the possible pieces of evidence that evaluates and formulates the opinion bases on communication that carry out.

Auditing Advantages Disadvantages

Types of Auditing:

In simple terms, auditing is nothing but an analysis of the current system, reports, and process of the organization.

Here are some of the types of auditing that are enlisted below,

  • Construction audit
  • Tax audit
  • Investigative audit
  • Financial audit
  • Information system audit
  • Compliance audit
  • Operational audit

Objectives of an Audit:

The main objective of the auditing is to provide a suggestion on financial reports and statements.

For this, the auditor needs to analyze all the financial statements to check the financial position of the entity.

Though the auditing will not cover all the errors and frauds that happened with the help of financial reports provided.

Here the main objectives of the auditing categorized into two types. They are
(i) Primary objectives
(ii) Subsidiary objectives.

Primary Objectives of Auditing:

The main objectives of auditing are also known as the primary objectives of auditing. Some of  them mentioned are below

  • Analyzing the internal system.
  • Checking the authenticity and validity of transactions.
  • Examining arithmetical accuracy of books of accounts, casting, balancing, etc.
  • Finalizing the current value of assets and liabilities.
  • Inspecting the variance between capital and revenue type of transactions.

Secondary Objectives of Auditing:

The secondary objectives of auditing also known as subsidiary objectives of auditing. Moreover, these are the type of objectives which help you in completing primary objectives. Some of them are

  • Finding and preventing errors
  • Finding and preventing of frauds
  • Unusual stock valuation.

For a clear overview of auditing, refer to this article in PDF format, archive

Importance of Auditing:

Auditing is nothing but an inspection of all the financial and statutory records relating to the company’s financial position.

This is mainly done for confirming the fair view of the reports or the authenticity of reports of an organization.

Importance of Financial Audit for Small Businesses:

  • Helps in attaining various important objectives
  • Misstatement risks
  • Prevention of any type of frauds
  • Cost of capital

Let us now look at a few advantages and disadvantages of auditing.

Advantages and or Disadvantages of Auditing: Advantages Disadvantages
1 Access to the capital market Extra cost
2 Lower capital cost Evidence
3 Deterrent to fraud and inefficiency Harassment of staves
4 Operational improvements Unsuitable changes
5 Ownership Chances of fraud
6 Amalgamating members of the company Small concerns
7 Value of business Problems in remedial measures
8 Gathering information about profit or loss Insufficient considerate
9 Confidentiality Not guaranteed
10 Assessing the tax
11 Proof can presents
12 The event of a loss
13 Settlement of claims
14 Settlement of disputes
15 Reports
16 Maintaining the reputation of the organization
17 High-quality perfection
18 Ethical behavior
19 Maximizing profit level
20 Impairments with quality standards
21 Analytical procedures
22 Reconciliations of items
23 Accounting on auditing
24 Returning the loan
25 No politics
26 Provisions in the budget
27 Auditor constructive
28 Regular audit
29 Settlement of claims
30 Money on contract basis
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Merits or Advantages of Financial Audit:

Auditing is a best practice that ensures the growth of public companies. Many of the stakeholders of the business are financial statements of the audit.

Auditing considers the place of substantive testing and the need to verify it. It considers following the set of rules. It mentions the maximum of the costs so that people can have prior intimation about the auditing. Here are some of the advantages of an audit program or the benefits of auditing.

1. Access to the capital market:

The public has to remain under the security exchanges and the requirements given under it. Once the auditing does the accounts that audit easily accepted by the Government such as Central banks, public authorities. This carries greater authority standards for the account to authorized.

2. Lower capital cost:

This has reduced information that associates with the financial statements that have lower interest rates and return on their investments. Sometimes this activity provides facilitated settlements and claims of a partner. By performing the process of auditing frauds and errors can be rectified on time.

3. Deterrent to fraud and inefficiency:

Auditing that has carried out has to be within the claimed accounts department. In the event of loss, the property that will maintain a fund is transferred. In case if the public has a separate ownership plan then the claims have to be resolved from the insurance claims.

4. Operational improvements:

An independent auditor can control and achieved operating efficiency within the client’s organization. It has an influence on the staffs along with the members of the client’s organization.

5. Ownership:

If a public company deals with the audition they can try to reassure the stakeholders about the accounts that maintained properly.

6. Amalgamating members of the company:

The nature of each organization will be to define the goals. This amalgamation helps in uniting people to work together as a team. This combination or unity can found during the process of auditing.

7. Value of business:

The event of purchase has to identify within the management and by the sales team. It interrelates with the settlement of claims, retirement funds, etc. In case of loss of property, one has to enhance the activities with moral values.

8. Gathering information about profit or loss:

This gathering will help in discussing the profit and loss of the company. Here employees can disclose their ideas upon which they are lacking and how can they overcome those obstacles.

9. Confidentiality:

During the process of the external audit, there is more private information such as internal employee salary, CPF, etc. It may be significant for the person to learn about the organization. It is because the auditor makes the consideration and conducts the meetings that hold regarding the audit.

10. Assessing the tax:

It is the process of calculating one’s property. The person who calculates called as an assessor. This information will record in the local government regarding taxes and support. It has a specialization in the preview logics that specifically modify for the sake of insurance.

11. Proof can presents:

During the audit, one may collect the details from the person to ensure that every property has a legal proof. It helps in the evaluation of further discussions. It helps in increasing the goodwill that might keep track of the collected data.

12. The event of a loss:

In the event of loss of lives or property, an individual can get help from the insured. It determines the values for business in the matter taking better decisions on their own. It enables one to collect details about the accounts and properties that maintained.

13. Settlement of claims:

The settlement of claims demands the enhancement and better atmosphere that sequenced within the organization. For accessing and influencing moral values one has to restrain themselves from performing fraudulent activities.

14. Settlement of disputes:

The disputes between the management can settle easily that handled within the past accounts. This requires independent information that enhanced the accurate assessment of the traders. It has a more constructive way of improving the efficiency of business within the management.

15. Reports:

It produces the report of the truth and fairness of the reported audit. It involves financial statements that are more compatible when a person goes through the documents and reports of the audit.

16. Maintaining the reputation of the organization:

For completion of an external audition, the reputation of the company enhanced in the meanwhile ensuring the growth of the organization. It reviews the multitude of regulations since it maintains a reputation in the community.

17. High-quality perfection:

Every organization will strive indefinitely for their success. These decisions will take in-case to undertake the particular concept that an organization provides. These financial representations of data can be gathered once the complete process of auditing gets over. It deals with the same accounting and interpreting of high-quality perfection.

18. Ethical behavior:

Auditing can repeat to gain the business and its overall strategies. It devotes to the dealings in the world. This analysis and exceptions are the most ethical behavior of a company. This information about accounting and records are qualified under the procedures of the firm.

19. Maximizing profit level:

An audit termed as an appraisal activity that related to the sequence of challenging circumstances that also involves the conflict that pursued in the maximum profit level that is to reach.

20. Impairments with quality standards:

Risk management here relates to the union and transactional specifications of the reviewed concepts. It has focused on the primary coordination of the standards. It must have impairments with quality standards.

This module is related to the estimates of expectancy. It avoids fraud activities that make use of the organization’s resources. It is mainly related to employee standards.

21. Analytical procedures:

It can neither help in prioritizing the changes and allocating them with the resources that record in the work papers of audits. It also involves the control environment and appointment of analytical procedures of the system.

22. Reconciliations of items:

These findings will identify if the reconciliations of the processed items and the respective operations are carried. This recommendation has to be finished at least once a month. The process of reviewing the reports can be estimated twice in a year.

23. Accounting on auditing:

Auditing is the process that includes testing and weighting of the accounts. It is the correctness of the reviews of the logic. It is critical, analytical and the investigation that is done leads to heavy work on ideas and adaptable methods. Audited accounts carry greater knowledge than the accounts that are under the process of auditing.

24. Returning the loan:

Some of the funds such as LIC, HUDCO, IFCI, etc, evaluates the previous year auditing accounts that are determined as more reliable. One can take any kind of loan that the bank offers. The policies that are followed does not remain constant whereas it will change twice in a year.

25. Provisions in the budget:

The provision in budget results in the event of sales, profits, and business and sometimes account for the loss. It also enhances the auditing even when the death of the partner is approved.

26. No politics:

Audits have politics that are no way related to politics or the politician. It has certain proofs that act the real linked data among the other recent ideas.

27. Auditor constructive:

Constructive people make certain disputes and take the decision that re-dictated free for help and continues to report it. It works with the people who deal with stakeholders to prove the efficiency of an organization. And It forces the organization to force settle all the disputes. It helps in quick and common rectification of frauds and other common errors.

28. Regular audit:

Regular audit deals with the accounts that are facilitated to involve the happening of the insured claims. It can create fear among the employees, to gain confidence in the related auditing sections.

29. Settlement of claims:

Some of the audited accounts that are explained are defined and must fit into the claims to ensure the recent files. It determines the value of the business to claim for the other networks.

30. Money on contract basis:

Here the money involved is on a contract basis that compromises certain related functions. It has the sense of hiring a permanent internal employee which makes more sense financially.

Demerits or Disadvantages of Auditing:

The main risk in the audit program is towards the assurance services that derive wrong conclusions. Assurances are to be provided within the related certification. Here are some of the limitations of an audit.

1. Extra cost:

Testing involves the extra cost to the organization which is considered a burden. It involves the disruptions of multiple cases. The auditor has to concentrate more even though there are disruptions. Before the audit begins the auditor must get the attention of all the staff members of the organization.

2. Evidence:

Evidence that is identified is more pervasive than conclusive. The strength of the submission of audited accounts makes major changes in the accounts of the distribution of profits.

3. Harassment of staves:

Since the employees cannot express their own in terms of auditing, these changes are calibrated and the employees will feel harassed due to the changes that are caused. Even if they try to express their knowledge of new ideas, the organization may not entertain the employees in these types of situations.

4. Unsuitable changes:

The rules and regulations of business may vary from time to time. It remains unstable when the program begins. The company’s policies may not change periodically whereas the rules and regulations may.

5. Chances of fraud:

Since the information delivered after the audit procedure is credential then there becomes more chance of getting the situations where an individual will be forced to commit the crime. It harasses the auditors to commit crimes after the audit gets over.

6. Small concerns:

Small-scale industries may usually proceed with transactions that are usually completed within a shorter period. Thus, auditing is not too important.

7. Problems in remedial measures:

Here the problem is created in remedial measures that are enhanced by the detailed interface of the data of remedial measures. These remedial measures are not included in the audit program.

8. Insufficient considerate:

The education curve will be contented about the business and insufficient relaxed networks and also offers systematic internal recruitment. These may gravely obstruct the expense of all the employees.

9. Not guaranteed:

Auditing cannot provide any data that are analyzed and prepared. It has financial accounts for the data that are provided. It is disclosed based on the information and explanations that are agreed on by the clients.


Accuracy in the audit process plays a vital role that is reflected in the statement of the correct amount. Classification of the transaction is handled properly and timings are recorded on the exact dates.

Posting and summation of the master file amounts are properly classified. Therefore without the audit process, the progress of the company cannot be identified.