RST Ltd., a mid-sized trading company, recently faced challenges in securing a bank loan due to doubts about the reliability of its financial…

Benefits and need of Audit: Audited accounts provide high quality information. It gives confidence to users that information on which they are relying is qualitative and it is the outcome of an exercise carried out by following Auditing Standards recognized globally.In case of companies, shareholders may or may not be involved in daily affairs of the company. The financial statements are prepared by management consisting of directors. As shareholders are owners of the company, they need an independent mechanism so that financial information is qualitative and reliable. Hence, their interest is safeguarded by an audit.An audit acts as a moral check on employees from committing frauds for the fear of being discovered by audit.Audited financial statements are helpful to government authorities for determining tax liabilities.Audited financial statements can be relied on by lenders, bankers for making their credit decisions i.e. whether to lend or not to lend to a particular entity.