What Is an Audit?
An audit is an independent examination of financial information, such as a company’s balance sheet or income statement. It is conducted by an auditor who has been hired to review the accuracy and completeness of the financial records. The purpose of an audit is to provide assurance that the financial statements are free from material misstatement due to fraud or error. Auditors use various techniques, including analytical procedures, tests of controls, and substantive testing in order to obtain sufficient evidence for their opinion on whether the financial statements are fairly presented in accordance with applicable accounting standards.
Audits can be performed internally (by employees within a company) or externally (by outside professionals). Internal audits typically focus on evaluating internal control systems while external audits involve assessing compliance with laws and regulations as well as examining overall performance against established goals. External auditors also assess risk management processes and evaluate how effectively management has addressed any identified risks. An audit report will include findings related to these areas along with recommendations for improvement where necessary.