Question

Discuss the importance of auditing as it relates to the accounting profession and the business community. (2) Discuss the effects of technology as it relates to the future of the profession.

please cite references. thanks

what information needed? It is simply what is the importance of auditing as it relates to the profession and the business community.

Answer 1

1) The Importance of an Audit

Auditing is a means of evaluating the effectiveness of a company's internal controls. Maintaining an effective system of internal controls is vital for achieving a company's business objectives, obtaining reliable financial reporting on its operations, preventing fraud and misappropriation of its assets, and minimizing its cost of capital. Both internal and independent auditors contribute to a company's audit system in different but important ways.

1 It helps in protecting the interest of persons who are not directly associated with an enterprise like partners, shareholders, creditors, debtors, etc.

2 It helps at the time of taking government grants.

3 It acts as a morale check on employees.

4 It helps to settle trade disputes.

5 Helps to settle accounts at the time of retirement, or death of partners. And also at the time of liquidation of any company.

6 Helps to settle tax liability, helps for making refunds of tax, etc.

Further,

There is a long list of reasons why you should have regular audits, but the most important ones involve accountability and good business practices.

1. You Will Have a Detailed Overview

Once the auditors have concluded their findings, you’ll have the final report in your hands. From here, you will have a complete picture of how your business is working. Even if you have spent a lot of time ensuring that your company has clean records and abides by every rule possible, there are bound to be small mistakes that should be corrected.

Additionally, the report will show you where your company is most stable. A good manager must know where to spend his or her time, and the first step in understanding that is to know where you don't necessarily need to focus anymore.

2. Receive an Additional Perspective

People - inlcuding yourself - can become complacent, even in the best possible team. This can create significant problems in the future, which is why it is critical for you to conduct an audit as a preventative measure.

A good auditor will give you clear remarks on whether you are demonstrating full compliance and if there are any serious flaws in your system. They’ll also offer helpful suggestions on how to solve them. If you conduct the audit early on, it could mean the difference between your company flourishing and struggling in the near future.

3. Improve Your Credit Rating

If you have a solid and expanding business, it is best for your bank, shareholders, and investors to know everything about it. Having regular audit reports is very beneficial to your relationship with any stakeholder or financial institution that you have business with. Your business investors want to know the success your company is experiencing, and want to make sure that you are trustworthy.

Your bank will be more willing to offer you a more affordable loan if they have definite proof you have the resources to repay the loan. That places you in the low-risk category in their perspective. The same thing can be said about investors, as increased confidence in your financial statements will ensure their continued support in your company.

4. Become More Reliable

If you own a larger company that has upper management or corporate investors, regular audits can provide reliability in your statements and inspire assurance that everything in your business is going as planned.

Even if you are a small business or just starting out, you will benefit greatly from the reliability your company will portray to the tax officials. They will be able to rely on your audited financial statements to reach their conclusions about your level of taxation or other matters from their area of interest.

5. Be Certain Where Your Company Is Going

With a professionally conducted financial audit, you will have much more information about which parts of your business are going smoothly and which ones require a bit of tightening up. For the areas that show no mistakes, you can be quite certain that you will not need to do any further recalculations to your original business plan. Those that show significant problems, however, demand a closer look: how are they run and how can you devise an efficient plan, before those seemingly minor mistakes hurt the company?

6. Promote Accountability

Additionally, you can use the auditor’s report to promote accountability for the managers and employees in your company. After all, individual employees will focus more on dependable accounting and management if they know that the company is regularly audited. They will also be able to correct any flaws in their own work while these problems are small, so they can make their work even more reliable in the future.

(2) Effects of technology on Audit :

Given the speed of technological and digital advances, it is imperative that those in the audit and finance profession invest in understanding and developing these technologies to benefit their respective sectors. This is a huge challenge, particularly in audit, where the pace of technological change, specifically the move from sample testing to 100% population testing, and from historic testing to real-time testing, is spearheading the need to revisit the audit approach in an unprecedented manner. Technology will drive down the time taken to conduct an audit, as testing becomes more automated and conducted on a real-time basis. Views were expressed around the need to develop new methods for calculating audit fees based on the technological resources used in the process and the value added by audit teams who derive insight from the data. There will be opportunities for the firms to develop more forward-looking assurance services, helping clients to manage risk and drive growth. Technological advances which could lead to the commoditization of the audit, and even the disintermediation of audit firms by other technology players, were considered potential threats of which audit firms need to remain vigilant. Technology is directing changes in the way clients run their businesses, changing their business models and processes. Auditors need to stay ahead of these changes in order to provide relevant advice and support service

In response to this audit firms are both recruiting and partnering with a variety of technology experts. Audit firms need to invest in digital initiatives, including AI, blockchain, cyber security and developments in data capabilities. These initiatives across multiple technologies will equip them to expand their assurance services to deal with the new technology driven risks that their clients face and safeguard their digital assets. Advances in technology open up a debate on the skill sets that are relevant to the industry now and in the future. While it is clear that lower level accounting and auditing skills can be replaced easily by technology, human business acumen and communication skills remain crucial. The required combination rests in a blend of human capital resources, incorporating specialist technology and digital skills, technical accounting and audit skills and professional skills such as communication, leadership and commerciality. While we are clearly on the cusp of a changing professional landscape, it remains unclear exactly where the digital revolution is heading and regulators are grappling with how best to regulate these markets. In the interim the professional membership bodies, professional services firms and corporates need to engage with technological developments and respond to the benefits, risks and opportunities they bring.