An audit is an independent examination of an entity's financial information. It is done to ensure that the books are being kept according to the legal framework which those entities operate within.
These are done on both profit and non-profit institutions. The goal is to ensure that all stakeholders have access to accurate information. For public companies, this is done to provide shareholders with the confidence in the filings of these corporations each quarter with the Securities and Exchange Commission (SEC).
Auditing is a vital part of the accounting process. They can be done both internally or externally.
The former is done to ensure that firm is operating according to the governance metrics and goals set up. Naturally, the latter is undertaken by an independent entity, those who do not work for the company, to validate what is being reported.
In most areas, purposely misstating the financial statements is a crime. Fraud is a major target of audits, uncovering situations where CEOs and other top level executives misleading the public.
