What Is an Audit?
The term audit usually refers to the financial audit or review of financial statements. A financial audit is an objective examination and evaluation of the financial statements of an organization to make sure that the financial records are a fair and accurate representation of the transactions they claim to represent. The audit can be conducted internally by employees of the organization or externally by an outside certified public accountant (CPA) firm.
Key Takeaways
- There are three main types of audits: external audits, internal audits, and Internal Revenue Service audits.
- External audits are commonly performed by Certified Public Accounting firms and result in an auditor’s opinion which is included in the audit report.
- An unqualified, or clean, audit opinion means that the auditor has not identified any material misstatement as a result of his or her review of the financial statements.
- External audits can include a review of both financial statements and a company’s internal controls.
- Internal audits serve as a managerial tool to make improvements to processes and internal controls.
Investopedia / Daniel Fishel
Understanding Audits
An audit is the…
