The risks of mistatement are usually assessed by the through the financial reports.Companies will not be able to create financial reports for external or internal control systems. With mistatements in financial record, it will not be easy to allocate resources to segments or product lines that are profitable. It will also not be easy to manage affairs and tell the status of assets and liabilities. The business might also be considered undependable in the market place because of its inability to produce goods and services in a reliable manner.
Audits help in fraud prevention and detection. Internal audit helps prevent fraud in business, Regular analysis of the operation of a company and maintaining rigorous internal control system help in detecting and preventing various kinds of fraud and accounting irregularities.
Professional providing audit services help design and modify internal control system for the purpose of fraud prevention. Deterence is part of fraud prevention. A company that has a functioning and thorough audit system in place may prevent employees or vendors from attempting schemes to defraud the company.
Audit Help reduce the cost of capital. strong audit systems can reduce or help decrease various forms of risks in business including the risk of material misstatement in financial reports. It also helps reduce the risk of misuse of assets, fraud and low quality management because of insufficient or lack of information on operations.