What does audit mean?

Audit means an official, systematic, and independent examination of records, accounts, processes, or performance to verify accuracy, compliance, and effectiveness. In finance and accounting, an audit is a thorough review of financial statements, receipts, invoices, bank statements, and tax returns to ensure they are correct, follow accounting standards like GAAP, and comply with tax laws, and to detect errors or fraud. In business operations, an audit can examine quality control, safety procedures, energy use, or internal controls to identify inefficiencies and risks. The word comes from Latin audire meaning to hear, historically auditors would listen to accounts being read aloud. An audit can be internal, conducted by employees within an organization to improve processes, or external, conducted by independent firms to provide objective assurance to investors, lenders, or regulators. The IRS conducts tax audits to verify that taxpayers reported income and deductions correctly. Overall, audit means a careful inspection to ensure what is reported matches reality, to promote accountability, build trust, and provide recommendations for improvement, and it results in an audit report with findings and conclusions.