## Benefits of Audit

### Stakeholder-wise Benefits

Stakeholder	Benefit
Users of FS (general)	High quality, reliable financial information — increases user confidence (by adhering to global auditing standards)
Lenders / Bankers	Take informed credit decisions based on audited financials
Tax Authorities	Accurately assess tax liabilities of the entity
Employees	Audit detects fraud and keeps a moral check on employee conduct
Shareholders	Can rely on audited data, since FS are prepared by management (conflict of interest mitigated)

### Additional Organisational Benefits

Evaluates Internal Controls: Auditor identifies and communicates deficiencies, plus areas for improvement
Detects Errors and Fraud: Audit acts as both a deterrent and a detection mechanism

Worked example

### Example 1

A bank receives audited financial statements of a borrower company before sanctioning a ₹5 crore term loan. The audit gives the bank confidence in the reliability of reported financials, enabling an informed credit decision — this is the Lender/Banker benefit.

### Example 2

During audit of a retail chain, the auditor discovers a cashier has been pocketing ₹500–₹1,000 per day over 6 months. The audit's moral check deterrent effect and detection capability benefit both the employer and honest employees.

⚠️ Common exam mistakes

Memorising only 2–3 benefits — exam questions may ask for 4–5. Know all stakeholders: shareholders, lenders, tax authorities, employees, and users of FS.
Describing benefits generically without linking to specific stakeholders — structure your answer stakeholder-by-stakeholder for full marks.

Reference:

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