Audit definition
/What is an Audit?
An audit is the examination of an entity's accounting records, as well as the physical inspection of its assets. If performed by a certified public accountant (CPA), the CPA can express an opinion on the fairness of the entity's financial statements. This opinion is then issued along with the financial statements to the investment community. An audit is usually conducted shortly after a firm’s books have been closed for its fiscal year.
Advantages of an Audit
There are several advantages to conducting an audit. One is that lenders, creditors, and investors will find a company’s financial statements to be more believable if a trained outside party attests to the veracity of those statements. In addition, the auditors can spot control weaknesses, inefficiencies, and other opportunities for improvement that can be reported to management. A third advantage is that an audit might find evidence of fraud, which can then be investigated and prosecuted. And finally, an audit may be required by a regulator, to ensure that the party in question is following the rules promulgated by the regulator.
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How to Conduct an Audit Engagement
The Internal Audit
An internal audit can address a broad array of issues, such as employee compliance with corporate policies. A compliance audit usually addresses an entity's compliance with the a government agency's rules and regulations. Larger organizations may employ a full-time internal audit department, since they have more complex processes that require monitoring.