Final answer:
External audits are often used for feedback control but can also be useful to prevent problems. In business, external audits provide an objective assessment of a company's financial position and performance. They can identify errors, improve processes, and prevent potential issues.
Step-by-step explanation:
External audits are often used for feedback control, but they can also be useful in preventing problems. In the context of business, an external audit is an independent review of a company's financial statements, internal controls, and compliance with laws and regulations. It helps to provide an objective assessment of the company's financial position and performance, ensuring transparency and accountability.
External audits can serve as a form of feedback control by identifying errors or irregularities in financial reporting or internal control systems. This feedback helps the company to correct any deficiencies and improve its processes. Additionally, external audits can also be preventive in nature. By regularly reviewing and assessing the company's financial records and control systems, external auditors can detect potential issues or risks before they escalate into major problems.
For example, an external auditor may identify weak internal controls that could lead to fraud or financial misstatements. By pointing out these vulnerabilities, the auditor allows the company to take corrective actions to prevent such problems from occurring. In this way, external audits serve as a proactive measure to safeguard the company's financial integrity and protect the interests of stakeholders.