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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Basically them looking at documents and you proving you didn’t cheat/steal anywhere. TLDR proving any “benefits” you claimed are real.
Like others have said, it compasses financial auditing which concerns with whether the books are correct, and whether the numbers are backed by evidence.
There are other audits involved in accounting. Other have mentioned internal audit which primarily concerns whether rules and regulations are followed.
IT audit checks computer system
And there is operation audit, to check the perforance of company or processes
Also there is forensic audit
Example, in an transaction and related payment the various audit could include:
financial audit: check whether an expense is backed up by invoices or authorization slip to prove that it is for legitimate purpose.
Internal audit: check whether the expense went through proper procedure of getting the necessary authorization of allowing the transaction.
IT audit: checks the computer system performing the transaction work as intended and is secure.
Proformance audit: to check whether the payment process is efficient i.e. whether it is costly, or takes too long time to make the transaction
Forensic audit: If there is a theft from this transaction, forensic audit checks what went wrong and who stole the money etc.
Source: I am a Canadian CPA and Certified Internal Auditor.
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