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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Companies produce a lot of different reports. They report their income and earnings to shareholders, they report their wages paid to the unemployment division of the state, they report their taxes paid to the state and federal revenue departments. They may also produce reports specific to their industry.
An audit is when another person or group of people are allowed to look at company data in order to verify if the report is accurate, complete, and correct.
So if a company reports that they had 45 full-time employees and paid all the unemployment insurance correctly, an audit would mean a person from the unemployment insurance agency could come in, and review their payroll records. If a company said it was worth $100 million, a financial auditor could look at their records of sales and purchases (their financial records) to verify how accurate that claim is. If a chemical company said it had 500 gallons of methylamine, an audit might involve someone physically counting the containers but also looking at records of sales and purchases.
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