Busn601

50 words agree or disagree to each question 

Q1.    This week we are talking about auditing and whether or not we think auditing is needed for effective financial reporting. I believe there needs to be some sort of auditing done to ensure the financial reporting is indeed accurate and reliable for an organization. Therefore, I disagree with the statement in this week’s forum posting for our discussion. 

There are two types of auditing; external and internal. Auditing is evaluating the effectiveness of a company’s internal controls (Clements, 2019). Auditing ensures accuracy in a company’s financial reports and can help the company with its objectives and vision for the future. Internal auditing is done by the company within itself. External auditing is done by an outside source (Clements, 2019). 

Performing an audit can shed light on accounting errors within individual departments or within a company as a whole. This is a problem that is needed to correct any accounting errors that are currently taking place. Incorrect accounting and lack of auditing could cause companies to make poor financial decisions in the future based on incorrect data. 

Additionally, it could lead to legal problems as well for the company. Auditing plays an effective role in fraud prevention (Clements, 2019). Finally, it could also be a deterrent to anyone in or out of the company that may try to defraud the company as well. I believe auditing is a very important part of an accounting system and a business as a whole. 

References 

Clements, J. (2019, February 04). The importance of an audit system to companies. https://smallbusiness.chron.com/importance-audit-system-companies-14705.html#:~:text=Without a system of internal,for internal or external purposes.&text=Accordingly, an audit system is,a company’s records and reports.

Q2.  I am actually shocked to see that auditing is not necessary for effective financial reporting, and I definitely disagree with that statement. An evaluation of the economy, resources, and your operations and controls should be a must. How will you know how efficiently you are operating or ensure the integrity of your finances if audits are not performed?  It may not be necessary to conduct the audit for financial reporting, but I guarantee that an audit will be conducted after you submit everything and you will have to resolve any issue that is found. It only makes sense to perform audits regularly or at least before submitted a financial report so that you can identify and correct deficiencies. 

Our reading talked about ethics, financial scandals, and how people are concerned with the validity of the reports that they receive. An external auditor would be able to examine the financial statements of the business without some of the bias that could be seen when relying on internal auditing. If the person performing the audit is the same person/people involved in a scandal, an internal audit would useless. If I am a business owner, a money problem is the last thing that I would want to deal with. Many customers want to know that they are providing business to a trusted and respectable business. Which are all reasons why it is important to have audits conducted.