Why Is Legal And Financial Audit So Important For Small Businesses in India

December 08, 2015

Legal And Financial Audit Helps Your Small Business Secure Credit and Stronger Financial Future

For most small business owners, the thought of a financial audit is about as exciting as getting a root canal. But audits can reveal important information about the financial position and organization of a business, making them an invaluable tool.

Small Businesses can receive tremendous benefits from better understanding their financial position. From improved interest rates and access to capital to protection from risk and even legal liabilities, financial audits can highlight areas of success or concern in a business and help the management team find greater pathways to future success.

Benefits Of A Legal And Financial Audit:

Lower interest rates on business loans
Better rate of securing financing
Identifying business weaknesses to avoid future tax penalties
Preparation for business growth

A financial review can also provide the business owner with greater familiarity with how the business operates, uses cash and assumes risk. Check with your bank or lender to see if audited financial are required or necessary – then follow up with a question about whom he or she would recommend to perform the audit. There legal and specific standards that the auditor will need to meet depending on your business’ size, sales volume and IPO intentions.

Knowing The Audit Process:

Why It Is Important Of Legal and Financial Audit For Small

Businesses In India

Auditing is a means of evaluating the effectiveness of a company’s internal controls. Maintaining an effective system of internal controls is vital for achieving a company’s business objectives, obtaining reliable financial reporting on its operations, preventing fraud and misappropriation of its assets, and minimizing its cost of capital. Both internal and independent auditors contribute to a company’s audit system in different but important ways.

The Objective:

Having an effective audit system is important for a company because it enables it to pursue and attain its various corporate objectives. Business processes need various forms of internal control to facilitate supervision and monitoring, prevent and detect irregular transactions, measure ongoing performance, maintain adequate business records and to promote operational productivity. Internal auditors review the design of the internal controls and informally propose improvements, and document any material irregularities to enable further investigation by management if it is warranted under the circumstances.

Risk of Misstatement:

Auditors assess the risk of material misstatement in a company’s financial reports. Without a system of internal controls or an audit system, a company would not be able to create reliable financial reports for internal or external purposes. Thus, it would not be able to determine how to allocate its resources and would be unable to know which of its segments or product lines are profitable and which are not.

Additionally, it could not manage its affairs, as it would not have the ability to tell the status of its assets and liabilities and would be rendered undependable in the marketplace due to its inability to consistently produce its goods and services in a reliable fashion. Accordingly, an audit system is crucial in preventing debilitating misstatements in a company’s records and reports.

Fraud Prevention:

Internal audit serves an important role for companies in fraud prevention. Recurring analysis of a company’s operations and maintaining rigorous systems of internal controls can prevent and detect various forms of fraud and other accounting irregularities. Audit professionals assist in the design and modification of internal control systems the purpose of which includes, among other things, fraud prevention.

An important part of prevention can be deterrence, and if a company is known to have an active and diligent audit system in place, by reputation alone it may prevent an employee or vendor from attempting a scheme to defraud the company.

Cost of Capital:

The cost of capital is important for every company, regardless of its size. Cost of capital is largely comprised of the risk associated with an investment, and if an investment has more risk, an investor will require a higher rate of return to invest. Strong audit systems can reduce various forms of risk in an enterprise, including its information risk.

An objective financial or legal audit/review can be a significant learning experience for any start-up business owner or management team. Your financial team, including acertified public accountant, bookkeeper, and tax professional can help you to take the information obtained during the process and utilize it to help strengthen and grow the business.

Below are listed top Legal and Financial audit service providers to choose from suiting your location and budgetary requirements:

TMT Law Practice- New Delhi

TMT is committed to providing the highest quality legal services. In order to meet their clients’ needs, the firm has formed associations with a number of specialist Professionals focusing on different practice areas. At the same time, the full resources of the firm are always available to clients to ensure that their needs are met with optimum efficiency.

They also provide Regulatory Advisory on Grant of Permission issues, Applications, License Renewal, License conditions, FDI and FIPB related issues, Tariff issues, Future Regulatory Trends, Interconnection, Interoperability, Platform Access and Denial, Subscription Contracts, Quality of Service norms, Competition Law and Policy, Government Relations, Interface and Engagement, Regulatory Litigation etc.

To read their latest updates click here.

TMT Law Practice is on the cutting edge of the communications revolution and this rich understanding of their clients businesses enables them to offer creative solutions to their clients.

Vakil Search – Chennai

They are a technology driven platform trying to organize professional services industry in India. Their mission is to provide one-click access to individuals & businesses for all their legal & professional needs.

Vakilsearch is the leading online legal services provider in India. With their technologically superior platform they deliver legal services that are affordable and accessible.

What they do: prepare legal documents like franchise agreements, wills, affidavits; get a company or a trademark registration done; handle your tax related matters; deliver quick online get legal advice on any issue!

They are the future of legal services in India.

Patanjali Associates – New Delhi

Patanjali Associates aims to create value for the clients in each of its core practice areas like due diligence and audit.

To review their news, click here

The services include:

Comprehensive legal audit under various laws like corporate laws, labor laws, securities laws and environmental laws
Recommended measures for improving index of legal compliance
Conducting legal due diligence
System to prevent potential legal exposure and mitigate legal risks

To review their case studies, click here

Patanjali Associates is a Delhi based law firm, bringing nearly 50 years of combined corporate advisory, legislative, and regulatory experience to address the clients needs. The firm has a 360 degree understanding of unique Indian environment and this allows the firm to offer customized solutions to the clients. The firm ‘s primary focus is on creating value for the clients in each of the core practice areas.

Finsmart – Pune

Finsmart Solution is a company that comprises of Chartered Accountants that offers effective procedures. The company ensures that you are relieved from day to day worries of accounting and payroll thereby allowing the companies to stay focused on building your business.

Over a period of time, several companies from different business segments like SMEs, start-ups, MNCs have trusted Finsmart solutions for their payroll and accounting needs.

A legal and financial audit of your small business practices can save you time and money later by identifying legal and financial concerns and the means to remedy them, today. If you would like more information about how SME Joinup can help your business and secure your company with a legal and financial audit.