A financial audit is a comprehensive review of a company’s financial statements, such as income statements, balance sheets, statements of cash flows, and notes to the financial statements. During a financial audit, external auditors review a company’s financial reports for accuracy and consistency with generally accepted accounting principles, or GAAP.
The purpose of a financial audit is to provide stakeholders with an independent and unbiased opinion of the company’s financial statements. This opinion is expressed in an opinion letter that is part of the audit process. Financial audits are also conducted for compliance purposes, to ensure that there are no material weaknesses or errors in the company’s accounting practices or financial statements.
The financial audit process involves a review of the company’s internal controls, operating procedures, and financial systems. Auditors may also conduct interviews with members of management and assess related party transactions and incurred costs. The review also examines the effectiveness of internal controls and whether they are appropriately designed to safeguard assets. This review helps the auditor identify any weaknesses in the internal controls that could lead to potential misstatements in the financial statements.
The financial audit report will provide a conclusion regarding the truth and fairness of the company’s financial statements in accordance with GAAP. The audit report will also include a list of significant deficiencies, if any, and management’s response to the audit findings.