What is the importance of having the accounts audited by an independent auditor.

The importance of having the accounts audited by an independent auditor is as follows: It safeguards the financial interest of persons who are not associated with the management of the entity, whether they are partners or shareholders. It acts as a moral check on the employees from committing defalcations or embezzlement. Audited statements of account are helpful in setting liability for taxes, negotiating loans, and for determining the purchase consideration for a business. These are also used for settling trade disputes or higher wages or bonus as well as claims in respect of damage suffered by property, by fire or some other calamity. An audit can also help in the detection of wastage and losses to show the different ways by which these might be checked, especially those that occur due to the absence or inadequacy of internal checks or internal control measures. Audit ascertains whether the necessary books of accounts and allied records have been properly kept and helps the client in making good deficiencies or inadequacies in this respect. As an appraisal function, audit reviews the existence and operations of various controls in the organizations and reports weakness, inadequacy, etc., in them. Audited accounts are of great help in the settlement of accounts at the time of admission or death of a partner. Government may require audited and certified statements before it gives assistance or issues a licence for a particular trade.