Audit

Business, Legal & Accounting Glossary

Definition: Audit


Quick Summary of Audit


An examination of the financial records of a person, business, or organization, typically done to correct careless or improper bookkeeping or to verify that proper records are being kept. Businesses and nonprofits often undergo an annual audit by an independent accounting firm. In the US, the IRS also conducts audits, mainly to assess taxes owed.



What is the dictionary definition of Audit?

Dictionary Definition


An inspection of the accounting procedures and records by a trained accountant or CPA.

Also:

  1. An audience; a hearing.
  2. An examination in general.
  3. A judicial examination.

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.

n. an examination by a trained accountant of the financial records of a business or governmental entity, including noting improper or careless practices, recommendations for improvements, and a balancing of the books. An audit performed by employees is called “internal audit,” and one done by an independent (outside) accountant is an “independent audit.” Even an independent audit may be limited in that the financial information is given to the auditor without an examination of all supporting documents. Auditors will note that the audit was based on such limited information and will refuse to sign the audit as a guarantee of the accuracy of the information provided.


Full Definition of Audit


The official examination of a company’s accounts by a qualified accountant external to the company.

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.


Examples of Audit in a sentence


The company carries out an audit at the end of each financial year.
An audit is the independent examination of, and expression of opinion on, financial statements of an entity.
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.


Synonyms For Audit


check, review, auditing, control, monitoring

Cite Term


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https://payrollheaven.com/define/audit/
Modern Language Association (MLA):
Audit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. July 04, 2020 https://payrollheaven.com/define/audit/.
Chicago Manual of Style (CMS):
Audit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/audit/ (accessed: July 04, 2020).
American Psychological Association (APA):
Audit. PayrollHeaven.com. Retrieved July 04, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/audit/

Definition Sources


Definitions for Audit are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 3 Views.