What is the definition of an audit?

• A. Independent examination and expression of opinion by a qualified practitioner to ensure financial statements give true and fair view.
• B. Internal audit within company.
• C. Tax audit by HMRC.
• D. Management's self-audit.

Answer: (A)

An audit is an independent, objective examination of a company’s financial statements carried out by a qualified practitioner. Its purpose is to obtain sufficient, appropriate evidence and then express an opinion on whether the financial statements, taken as a whole, give a true and fair view of the entity’s financial position, performance and cash flows in accordance with the applicable financial reporting framework. The independence of the auditor is crucial because it ensures the opinion isn’t biased by internal interests, providing users with credible assurance. This definition distinguishes audits from internal reviews, such as internal audit conducted by the company’s staff to assess controls; from tax audits conducted by tax authorities to verify tax compliance; and from management’s self-audit, which is a self-review without external independence.