I keep hearing this term from my accountant friend and have absolutely no idea what it means. I tried googling it but that just left me even more confused than I was.
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Another aspect I haven’t seen so far, is also the regulatory aspect of auditing, especially within accounting. It is often mandated by law, and a regulatory mechanism for the benefit of the government and broader society. At least in the EU, given the size of a company are required to be audited. Furthermore this audit have to be done from someone that has a license to perform audits. I also think accounting firms that do audits have to either educate their auditors or even be licensed to be an firm that can do auditing.
Companies have to report on various financial numbers and auditors make sure everything is correct. And if they report that their audit isn’t correct, then there can be major consequences for the company that doesn’t show healthy financial numbers.
And even more interestingly is that being audited is actually a service(expensive too) you pay for, but auditors have to comply with the law, so they can sometimes act not in the best interest of the client.
A few years ago, there was a major corporation that was technically insolvent, despite actually being profitable. The company disagreed with the auditors opinion, and kinda hired every major auditing firms, which in turn all came to the same conclusion, and the company was made insolvent due to the audit.
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