How can the external audit improve the financial performance of a company?

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Phi -Hung Nguyen

In my opinion, an external audit can play a significant role in improving the financial performance of a company in the following ways:

Providing an independent assessment of financial statements: External auditors can provide an unbiased assessment of a company's financial statements, helping to identify errors or potential fraud. This can help improve the accuracy and reliability of financial information, which can aid decision-making and improve overall financial performance.

Ensuring compliance with regulatory requirements: External auditors must ensure that a company's financial statements comply with relevant accounting standards and legal requirements. By ensuring compliance, external auditors can help to avoid legal or regulatory penalties, which can negatively impact a company's financial performance.

Providing insights into operational efficiency: External auditors can also provide insights into a company's operations and financial management practices. For example, an auditor may identify inefficiencies in inventory management or recommend changes to internal controls. These insights can help a company to improve operational efficiency and reduce costs, ultimately leading to improved financial performance.

Enhancing investor confidence: External audits can also help to enhance investor confidence by providing assurance that a company's financial statements are accurate and reliable. This can lead to increased investor trust and potentially result in improved access to capital.

Sameer Abed Shamkhi

In my opinion, an external audit can play a significant role in improving the financial performance of company be : Comprehensiveness in scrutiny and complete independence in giving opinion, and he has a spirit of responsibility at work

Christopher C Kelly

This is an example of asking the wrong question and therefore getting the wrong answer. External audit's role is assurance, not improving financial performance. If management wished to improve the company's financial performance, there would be a range of actions better than turning to the external auditors. Any benefits to financial performance arising from the audit, such as those identified in the above answers, would be incidental only.

Auachi Yousra

Christopher C Kelly yes there is no doubt about this , but i want to study the relation between the external audit and the financial performance, because generally when we speak about company's financial performance in researchs and studies we related it to the internal audit

Hello Auachi Yousra . Internal audit, like external audit, is primarily an assurance role which may or may not impact on financial performance. When we consider financial performance, we typically look at management strategy, revenue, cost, synergy and efficiency. So I am unsure whether your research is aimed at financial performance or audit? Maybe we can provide better answers if you tell us your research question.

Christopher C Kelly i know that there is no direct relation between the 2 variables , but the connecting ring is the financial information.

external audit ensures the quality of the financial information disclosed in the financial statements, that is used in the evaluating company's financial performance. and my research it's really not about the external audit but about the audit standars (in my case it's about the algerian auditing standars that is matching with ISAs).so,my Question is :how can the ISAs contribute in improving company's financial performance?