Final answer:
A financial audit is an evaluation that provides an unbiased opinion about the truthfulness of a company's financial statements, involving review of internal controls, transaction testing, and compliance with accounting standards.
Step-by-step explanation:
A financial audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements. An auditor examines the financial records and practices of a firm to assure that the financial reports are a fair and accurate representation of the transactions they claim to represent. This involves analyzing the company's internal controls, testing selected transactions, and communicating with third parties. Additionally, the auditor will check for compliance with accounting standards and laws.
The purpose of a financial audit is to provide stakeholders, such as investors, creditors, and regulatory bodies, with assurance that a company's financial statements are free from material misstatement.
For companies, having an audited financial statement may help to improve the confidence of investors and can also be a legal requirement. A(n) external audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.
An external audit is conducted by an independent auditor who is not employed by the company being audited. The auditor examines the financial documents, records, and transactions of the company to ensure that the financial statements present a true and fair view of the company's financial position.
The purpose of an external audit is to provide assurance to stakeholders, such as shareholders, creditors, and investors, that the financial statements are reliable and can be trusted. The audit opinion issued by the external auditor helps users of the financial statements make informed decisions based on the company's financial information.