What is an accounting audit? And What happens during an audit?

Answer by Wray Rives:

An accounting audit is a review of a company's accounting records to determine if the financial statements of the company are accurate and fairly reflect the financial condition of the business.

Most people think of audit as being when an outside accounting firm, sends people into the business to review the accounting records.  In the US, accountants are required to have a CPA license in order to issue a statement of opinion on the fairness of the financial statements.  The auditors will typically follow an outline of tests that are performed to verify the accuracy of various figures presented in the financial statements, such as cash balances, accounts receiveable and accounts payable.

An audit might also involve an internal audit, whereby the books and records are reviewed by internal auditors or by outside auditors who are working under the direction of management.  An internal audit would not involve issuing an opinion on the accuracy of the financial statements, but rather would be directed at specific tests of accounting information for internal purposes.

An audit might also involve a government agency sending an auditor to check the accuracy of tax reporting done by the company.

What is an accounting audit? And What happens during an audit?