Many entrepreneurs view the role of financial management in the company as profitless, believing it is of high-cost and has no significant or noticed return in the company. We have often come across such situations through our professional career, and the most frequently reasons are: the entrepreneur's own personality or the failure of financial management to perform its functions properly in the company.
Successful financial management imposes its importance on all the company's departments because it is the only department that collects all the financial statements of the enterprise. It is responsible for transferring these data in the form of financial reports through which the business activities and the financial performance of an entity can be assessed partially or as a whole and even deficiencies in some departments or the success of others in achieving the enterprise's objectives can be identified.... all of this benefits the business owner when it comes to making future decisions to develop the company's activities and maximize its profits.
Sound senior management takes a proactive approach to financial management. It is regarded as a guide in a dark room and as a warning tool for the owner of the company before falling into any financial problem that impacts the company's success and future… That’s why financial statements in managing the company financially and administratively safeguard the rights of owners and partners within the company. Not only the financial statements should be free from material misstatement but also timely appropriate... So, they can be relied upon to make suitable strategic decisions as quickly as possible- especially with the impact of the various economic decisions and new laws that have significant economic impacts on companies.
From the discussion above, we can recognize the risks that might arise if the company made its decisions based on financial statements that are not free from material misstatement. Hence, the vital role of auditing cannot be overlooked, whether internal or external. Internal audits evaluate company's internal controls, including its corporate governance and accounting processes, ensuring compliance with laws and regulations and help to maintain accurate and timely financial reporting and data collection. On the other hand, external audits examine the financial records and their effectiveness to provide an opinion thereon.
We sometimes find that there is no internal audit department in the company; accordingly, we rely on the company's CFO's experience in validating financial reports and managing accountants. In these cases, the external auditor's role is of a great importance as he/she carries out the duties of internal and external auditor.
Therefore, it is important for any activity to have control over financial management whether it is internal (internal audit), external (external audit) or both in order to achieve a high degree of confidence in the validity of the financial management statements on which the company’s future decisions will be based.