What is a financial audit?

A financial audit is defined as a detailed evaluation of a company's financial statements and practices. This process involves a thorough examination of the financial records, ensuring that the statements accurately represent the company's financial position and comply with applicable accounting standards and regulations. The goal of a financial audit is to provide an independent assessment of the financial health and integrity of an organization. This is crucial for stakeholders, including investors, creditors, and regulatory authorities, as it assures them that the financial information presented is reliable.

The focus of a financial audit is specifically on financial documentation, including balance sheets, income statements, cash flow statements, and related records, rather than marketing strategies, budgets, or tax preparation processes. In essence, a financial audit seeks to validate the accuracy of financial reporting, identify potential areas of risk, and enhance transparency in the financial statements of the organization.