What is an Audit?
An audit is an official inspection of an organization’s accounts, typically by an independent body.
To conduct an official financial inspection of a company or its accounts.
Background Information
Audit can be done internally by employees or heads of a particular department and externally by an outside firm or an independent auditor. The idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are done in a fair manner and there is no misrepresentation or fraud that is being conducted.
Auditor: The person who conducts the audit. An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency.
Current Impacts
What does this mean for businesses?
Almost all companies receive a yearly audit of their financial statements, such as the income statement, balance sheet, and cash flow statement. Lenders often require the results of an external audit annually as part of their debt covenants. For some companies, audits are a legal requirement due to the compelling incentives to intentionally misstate financial information in an attempt to commit fraud.
- Audit – Meaning in Finance and Accounting and 3 Main Types: https://www.investopedia.com/terms/a/audit.asp
- Auditor – What It Is, 4 Types, and Qualifications: https://www.investopedia.com/terms/a/auditor.asp
