A question often arises in the minds of businessmen whether audit is luxury or not. They say accounting is necessity and auditing is a wastage of time and money. Auditing may be luxury from the point of view of an ordinary businessman because of following reasons:-
- The remuneration paid to the auditor is an unnecessary waste of funds.
- Too many formalities attached to auditing create difficulties for an average businessman.
- The businessman feels that auditing means waste of time and disturbance in routine work of the accountant and his subordinates.
- Audit is not perfect method of detecting errors and frauds.
Thus, auditing for a small business may be luxury but it is a necessity for a large business organization for the following reasons:-
- Accounting data needs to be verified as to their reliability and accuracy.
- Public funds invested in the private sector of economy need to thoroughly examined as to their proper utilization.
- Various social groups who are interested in affairs of a business entity need to be assured that the entity functions are discharged efficiently and to the best advantage of social will-being.
- Absentee shareholders created out of widely dispersed ownership of management need to be provided with sufficient assurance that the figures in the profit and loss account and balance sheet are fair representations of the financial conditions of a business.
Thus, keeping in view the above, one can not say that auditing is luxury. Auditing is necessity of big organizations. Auditing is compulsory in case of Private Limited Companies, Limited Companies, Charitable Trusts, Societies, Banks etc. The partnership firms or proprietorship firms can also engage the auditors to have the fair view of accounts. Auditing is not wastage of money because so many frauds can be detected from auditing and the money paid to the auditors looks very petty amount in comparison of the frauds detected. Auditing is not the wastage of time also. Normally, auditors do not disturb the the accounting staff. The do their own work. Very few interference is done by them with the accounting staff. The findings or benefits of audit are more precious than wastage of little time of accounting staff. In my view, every business firm whether it is small or big, must avail the services of the auditors.
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