Business Glossary

1. financial audit -examination of a client's accounting records by an independent certified public accountant to formulate an audit opinion . The auditor must follow Generally Accepted Accounting Principles (GAAP) . Source documents are examined to substantiate legitimacy of transactions. A careful evaluation of internal control is necessary.
2. internal audit -investigation of the company's procedures and operations by the internal auditor to assure that they conform to corporate policy.
3. management audit -evaluation of management's efficiency.
4. compliance audit -ascertainment of the firm's compliance with specified rules and regulations.

professional examination and verification of a company's accounting documents and supporting data for the purpose of rendering an opinion as to their fairness, consistency, and conformity with Generally Accepted Accounting Principles .

examination and verification of a company's books and records by a qualified accountant. An auditor's letter of opinion, which may be qualified or unqualified, is included in the company's annual report. Community banks have generally been exempted from the requirement by bank regulators for an annual audit. Audits are also required by the Securities And Exchange Commission for companies with registered securities.

inspection of the accounting records and procedures of a business, government unit, or other reporting entity by a trained accountant, for the purpose of verifying the accuracy and completeness of the records. It may be conducted by a member of the organization (internal audit) or by an outsider (independent audit). A CPA audit determines the overall validity of financial statements. A tax (IRS) audit determines whether the appropriate tax was paid. An internal audit generally determines whether the company's procedures are followed and whether embezzlement or other illegal activity occurred.

in workers compensation insurance policies and several business property and liability policies, review of the payroll of a business firm in order to determine the premium for coverage. Premiums in workers compensation are based on units of payroll.

In general: official examination and verification of accounts and records, as in a tax audit.
Publishing: examination of a publisher's records by an outside auditing firm to ascertain the validity of the publisher's statements regarding the circulation figures of a publication. An audit is done in an official capacity on an annual basis. The circulation figures are important, because the cost of advertising is based on circulation. The greater the circulation, the larger the reading audience, and, therefore, the greater the cost of advertising. Also audited are the publisher's methods of arriving at the circulation figures with separate notations for reduced rate subscriptions, free copies, or subscriptions in arrears. See also Audit Bureau of Circulations ; audit trail ; Business Publications Audit of Circulations ; Verified Audit Circulation Corporation.

inspection of the books, records, and procedures used by a business or individual, conducted by a CPA or other person qualified to do so.

Example: An audit was required as part of the sale of a commercial building to verify historical financial information.