What is an Audit?

An Audit is an independent examination and verification of a company’s financial statements and related records to ensure accuracy, compliance with accounting standards, and regulatory requirements. Audits can be internal or external.

Types of Audits

• Financial Audit: Reviews financial statements for fairness and accuracy.

• Operational Audit: Evaluates operational efficiency and effectiveness.

• Compliance Audit: Checks adherence to laws, regulations, or contracts.

Example

A public company undergoes an annual financial audit by an external accounting firm to meet stock exchange and regulatory requirements.

Benefits

• Ensures financial statement reliability.

• Boosts investor and lender confidence.

• Identifies fraud or mismanagement risks.