the impact of audit to the company in relation to the cost of capital (or cost of borrowing) should be that it reduces the cost of capital.
This is because audit enhances the reliability of the financial statements. If financial statements are audited and show good profitability of the borrowing company, the bank will believe that the financial statements reflect true and fair view of the borrower's financial position and the audited profits will attract the bank to lend money at a favorable interest rate. It is common sense that bank lend money to people who have a lot of money or companies which make a lot of money at a lower rate because the risk associated with lending money to the above-said individuals and entities is very low.
Audit also means the borrower has a good internal control. A good internal control not only results in reliable accounting system and financial statement reporting, but also giving an impression that the company has good corporate governance. So it directly increases lender's (bank for example) confidence in lending money to the borrower.
相關搜索目錄: Accounting
