Financial Audit
A financial audit is a systematic and independent examination of a company’s financial statements and records to assess their accuracy and compliance with accounting standards and regulations. It’s a process where an external or internal auditor verifies the financial information to ensure it fairly represents the company’s financial position and performance.
Businesses conduct financial audits for a number of reasons, to include:
(i) Improving operations and internal controls.
(ii) Improving reputation, credibility, and trust as well as assuring stakeholders.
(iii) Detecting and resolving errors and fraudulent activity.
(iv) Facilitating growth and expansion.
Authorities For Further Research(i) The Financial Accounting Standards Board (FASB) sets accounting and reporting standards for public and private entities following Generally Accepted Accounting Principles (GAAP) in the U.S..
(ii) The Governmental Accounting Standards Board (GASB) establishes GAAP for U.S. state and local governments.
(iii) The International Accounting Standards Board (IASB) develops International Financial Reporting Standards (IFRS), used globally to enhance financial reporting.
(iv) The Federal Accounting Standards Advisory Board (FASAB) issues standards for the U.S. federal government.
(v) The Securities and Exchange Commission (SEC) has the authority to set and enforce accounting standards, particularly for public companies adhering to GAAP.
(vi) The Public Company Accounting Oversight Board (PCAOB) oversees audits of public companies.
State Boards of Accountancy regulate licensed accounting professionals within their states.
(vii) The American Institute of Certified Public Accountants (AICPA) develops standards for audits of nonpublic entities and sets ethical requirements for its members.
(viii) The National Association of State Boards of Accountancy (NASBA) coordinates state boards and promotes uniform regulations.
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