UK Accounting Glossary
An audit is the independent examination of, and expression of opinion on, financial statements of an entity.
An inspection of the accounting procedures and records by a trained accountant or CPA.
In finance, an audit is the review of a company’s financial statements, verifying them for accuracy, relevance, and completeness. Since financial statements are used to gauge a company’s financial health by many parties (investors, stakeholders, regulators, etc.), an audit ensures that public financial information is presented clearly and accurately. Audits can be either an internal process or can be performed by an external firm.
An audit is the examination of records and reports of a company, in order to check that what is provided is relevant, and reflects reality. That is to say, to ensure that all assets and liabilities are properly recorded in the balance sheet, and, all profits and losses are properly assessed.
An audit assessment is typically implemented through two methods, by assessing internal control procedures and by checking the consistency of items in the books.
An audit is an objective process that involves evaluating and examining a company’s financial information. Journals, bank and credit union accounts, ledgers, invoices, expense accounts, and related documents are often scrutinized during the audit process. An audit may be conducted by either internal professionals (e.g. in the case of an internal audit) or external firms (i.e. in the case of an internal or an external audit). In both situations, audits are performed under the guidelines of Generally Accepted Accounting Principles (GAAP). An organization may undergo an audit for a number of different reasons. For instance, if an organization wants to obtain a loan, investment money or sell a business, the business may decide to undergo an audit to confirm and certify the accuracy of its financial documents.
Another common form of audit is an IRS audit where the IRS examines taxpayers (e.g. company or individual) financial data to ensure that all government reported tax filings are accurate. Depending on the situation, these IRS audits can be conducted in-person (i.e. office or field audit) or via mail (i.e. correspondence audit). An in-person audit is often more serious than a correspondence audit. Typically, the in-person audit will take place at an IRS office location or at the taxpayer’s office location where records are kept. Although a taxpayer may request that the audit location be transferred to a location of their choice, the IRS is not required to grant such request.
The company carries out an audit at the end of each financial year.
As per usual, the annual audit will take place in April.
The internal auditing function reports directly to the Audit Committee.
Government audits have traditionally been concerned with the financial and regularity considerations.
The bank first became aware of the issue once it had carried out an internal audit.
A qualified audit report should leave the reader in no doubt as to its meaning and implications.
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This glossary post was last updated: 23rd December 2018.