What is a financial audit?

A financial audit is defined as an independent examination of financial information, which is crucial for ensuring accuracy and compliance with accounting standards and regulations. This process typically involves a thorough review of financial statements, records, and internal controls to assess whether the financial statements are free from material misstatements. The objective of a financial audit is to provide credibility to the users of financial statements, such as investors, creditors, and management, offering them assurance that the reported financial information reflects the organization’s true financial position.

Independent auditors perform these audits to maintain objectivity and impartiality, enhancing the trustworthiness of financial reporting. This contrasts with a less formal review or discussions about financial strategies, as those do not involve the same level of scrutiny or authoritative assessment that an audit entails.