Advantage of auditing can be grouped under the following catagories:-


  • It helps the management in detection of errors and frauds.
  • It helps the management in obtaining loans from banks and other financial institutions as the audited statements are relied upon.
  • It builds up the reputation of the business.
  • Auditors can give concrete suggestion regarding improvement of business on the basis of their findings in records.
  • Government authorities accept audited statements as true and fair for the purpose of taxation.


  • In case, business is managed by some agent or representative of the owner, audit helps in knowing the true financial position. Because of the fear of detection, the manager is restrained from committing frauds.
  • In case of partnership, the partners can rely on the audited accounts to settle their disputes e.g. in regard to adjustment of capital and valuation of goodwill at the time of admission, retirement and death of partner.
  • In case of joint stock companies, the ownership and management are separated. Auditing ensures the shareholders a true and fair reporting of the financial position of a company.


  • In the event of claim for loss of property, an insurance company can rely on the audited figures.
  • Financial institutions in their appraisal of a loan proposal, can take comparatively more reliable decisions on the basis of audited accounts.
  • The Purchaser of business can calculate the amount of purchase consideration easily.
  • Analysis and interpretation of financial statements.


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