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What is the harm in conducting an audit of one’s business without involving any third-party? Any and every audit involves verification of the subject of the audit. An audit of the financial statement involves verification of every bit of information presented in the same. There must be a logical link between each transaction and the ultimate results shown in the financial statement. There must be sufficient proof in the form of documentary evidence or paperwork.
To conduct the audit without involving a third-party professional is obviously going to lead to loss of credibility. What is the guarantee that the management shall not convert the audit into a rubber stamp exercise which simply approves every decision of the management? A fraud conducted by the management itself will never be caught because the judge and the thief would be the same.
It is important to hand over the task of audit to outsiders even when one is carrying out an internal audit or a management audit of a specific department or a specific process. Accountability is a very important issue when public money is at stake. A wrong decision by the management or a decision based on insufficient or irrelevant facts should be identified and remedied. The process may involve censuring the actions of certain people associated with the organization. To make sure that the process is impartial and credible, it is important to involve third parties.
What is more, audit is a professional exercise and requires the services of people who have been specially trained to carry out such an activity.
