audit

noun
au·​dit | \ ˈȯ-dət \

Definition of audit

 (Entry 1 of 2)

1a : a formal examination of an organization's or individual's accounts or financial situation The audit showed that the company had misled investors.
b : the final report of an audit
2 : a methodical examination and review an energy audit of the house

audit

verb
audited; auditing; audits

Definition of audit (Entry 2 of 2)

transitive verb

1 : to perform an audit of or for audit the books audit the company
2 : to attend (a course) without working for or expecting to receive formal credit audited a foreign language course

Keep scrolling for more

Other Words from audit

Verb

auditability \ ˌȯ-​də-​tə-​ˈbi-​lə-​tē \ noun
auditable \ -​ˌȯ-​di-​tə-​bəl \ adjective
auditee \ ˌȯ-​də-​ˈtē \ noun

Examples of audit in a Sentence

Noun

The Internal Revenue Service selected us for an audit. You will need all your records if you are selected for audit by the IRS.

Verb

They audit the company books every year. The Internal Revenue Service audited him twice in 10 years. I audited an English literature class last semester.
See More

Recent Examples on the Web: Noun

For example, new vehicles currently need to get government approval before being mass-produced and undergo a mandatory technology audit that usually lasts several days, foreign firms say. Doug Cameron, WSJ, "How the U.S. Can Protect Corporate America’s Tech Secrets From China," 10 Jan. 2019 No malicious hardware was found in the audit, and no beacons or other network transmissions that would be indicative of a backdoor were detected in testing. Sean Gallagher, Ars Technica, "Audit: No Chinese surveillance implants in Supermicro boards found," 11 Dec. 2018 The following day, a Franklin County audit reduced that lead to 1,564. Brooke Singman, Fox News, "Ohio special election vote count drags on, as state defends tally," 15 Aug. 2018 The findings in a state audit that uncovered evidence that indicates two former San Ysidro school administrators may have conspired to engage in fraud or misappropriate district funds have been turned over to the District Attorney’s Office. David Hernandez, sandiegouniontribune.com, "Audit findings related to ex-San Ysidro school administrators turned over to the DA," 16 June 2018 But the students didn’t find a lot of waste in the audit: Discovery is already ultra-energy efficient. Chris Berdik, WIRED, "Solar Panels Power New Schools—and New Ways of Learning," 6 June 2018 NJ Transit suffers from years of underfunding, low staff morale and widespread rider dissatisfaction because of delays, cancellations and overcrowding, an audit earlier this year found. Paul Berger, WSJ, "NJ Transit Hires New Head of Operations," 17 Dec. 2018 An audit released in May found that the range of services offered to students enrolled in special education classes declined during the past two years. Heather Cherone, chicagotribune.com, "District 64 can't accept offer for administrative office building, board attorney says," 3 July 2018 After an audit found the group had spending issues, Cranley forwarded a budget to council that slashed the entire $750,000 the Health Gap got from the city this year. Sharon Coolidge, Cincinnati.com, "Cincinnati council members agreed on a budget. Here are the winners and losers.," 25 June 2018

Recent Examples on the Web: Verb

But pressure eventually led to the company’s auditing its factories for health and safety issues. Lorraine Mirabella, baltimoresun.com, "Supermarket giants play role in mistreatment of global food workers, report says," 20 June 2018 President Trump, who has refused to release his tax returns, has complained that the IRS unfairly audited him for years. Richard Rubin, WSJ, "Senate Confirms Charles Rettig as IRS Commissioner," 12 Sep. 2018 Documents obtained by The Times reveal that the IRS audited Fred Trump’s 1995 gift tax return and concluded that Fred Trump and his wife had significantly undervalued the assets being transferred through their GRATs. Susanne Craig, The Seattle Times, "Trump engaged in suspect tax schemes as he reaped riches from father," 2 Oct. 2018 Portland, Oregon became the first city to abolish its gang list and, last year, California passed a bill to stiffen the criteria for adding someone to the CalGang database and to regularly audit the list. Jacqueline Serrato, chicagotribune.com, "Lawsuit seeks mechanisms to contest individuals' inclusion in Chicago gang list," 19 June 2018 The couple enjoyed traveling to Europe — Italy was a favorite destination — and audited courses together at Harvard. Marvin Pave, BostonGlobe.com, "Aaron Fink, former superintendent of Newton’s schools, dies at 95," 15 June 2018 The details around if and how Facebook would allow civil rights groups to audit credit and housing companies that operate on the platform. Brian Barrett, WIRED, "A Comprehensive List of Everything Mark Zuckerberg Will Follow Up On," 11 Apr. 2018 All of which creates boundless opportunities for drones to audit progress, detect pilfering, and more. Rob Reid, Ars Technica, "Ars on your lunch break: How to survive competing with China," 25 Oct. 2018 Farms representing more than half of the co-op’s milk supply have been audited. Benjamin Romano, The Seattle Times, "Darigold says it’s working to improve dairy industry’s safety record," 20 Aug. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'audit.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

See More

First Known Use of audit

Noun

15th century, in the meaning defined at sense 1a

Verb

15th century, in the meaning defined at sense 1

History and Etymology for audit

Noun

Middle English audyte "examination of accounts, judicial hearing," borrowed from Medieval Latin audītus "sense of hearing, act of listening, right to judicial hearing, examination of accounts," going back to Latin, "sense or act of hearing," from audīre "to hear" + -tus, suffix of action nouns — more at audible entry 1

Note: The sense "examination of accounts," attested relatively late in Medieval Latin, is based on the word audītor, which in the meaning "one who examines accounts" is recorded much earlier—see auditor.

Verb

Middle English audyten, derivative of audyte audit entry 1; in sense 2 back-formation from auditor

Keep scrolling for more

Learn More about audit

Statistics for audit

Last Updated

15 Jan 2019

Look-up Popularity

Time Traveler for audit

The first known use of audit was in the 15th century

See more words from the same century

Keep scrolling for more

More Definitions for audit

audit

noun

Financial Definition of audit

What It Is

In the tax world, an audit refers to the review of a taxpayer's tax return for accuracy.

In the accounting world, an audit is the examination and verification of a company's financial statements and records, and in the United States, examination for their compliance with Generally Accepted Accounting Principles (GAAP).

How It Works

Accounting professionals, usually Certified Public Accountants (CPAs), perform audits. These auditors must be independent, unbiased, and qualified to provide an auditor's report (also called an opinion).

There are four major steps in the audit process:

-- Defining the terms of the engagement between the auditor and the client
Planning the scope and conduct of the audit
Compiling the audited information
Reporting the results of the index audit

The terms of an engagement are usually set forth in an engagement letter that is written by the auditor and signed by the client. The letter documents the auditor's role and addresses any specific issues. The audit plan defines the scope of the audit and key deadlines. Quite often the company's audit committee (primarily composed of board members) reviews and approves the audit plan.

One of the goals of a financial audit is to find and correct any material misstatements, which are statements that are wrong, missing, or incomplete whether made deliberately or accidentally. This is why auditors must be able to drill down to the source of each piece of data (this is called the audit trail). To compile the information necessary to do this, an auditor does many things. For example, the auditor tests the transactions and account balances that make up the financial statements as well as the design and operation of the systems that generated those statements.

Auditors also employ sampling techniques, whereby they evaluate less than 100% of the items within an account or class of transactions as a way to understand the nature of the entire account or class of transactions. For example, an auditor will usually not check every expense report in a large company to make sure each has receipts attached. Instead, the auditor will pull a random sample of the reports, examine those, and draw conclusions about the quality of the information and controls related to expense reports. Auditors also analyze significant trends or ratios and question changes or variances from predicted amounts. Further, they investigate the reasonableness of management's accounting estimates of uncertain events or events that are likely to occur (such as the outcome of litigation).

Auditors perform their audit procedures in accordance with the International Auditing and Assurance Standards Board (IAASB), which is a committee of the International Federation of Accountants (IFAC). The IAASB develops standards and guidance that are considered best practices for auditors. The IFAC also sets ethical and independence standards for auditors and in particular emphasizes that auditors should be, and be seen to be, free from any influence that might jeopardize their independence. The SEC and other regulatory bodies determine which types of entities are subject to audit as well as the kind of information on which the auditor should report.

Audits can take a few days or several months, depending on the complexity of the financial statements and the degree to which the auditor inspects the company's financial statements and controls. When the audit is complete, the auditor publishes the audit findings in the auditor's report, which prefaces the financial statements in the company's public reports and filings. This report is usually the only public document available about the audit process, but the auditor often issues private reports to the company's management or audit committee as well as to regulatory authorities. The index auditor keeps extensive written records, called working papers, that provide the basis and support for each of its opinions.

When an auditor feels that a company's financial statements are fair and accurate, it issues an unqualified opinion and does so using a standard reporting template (this is why many opinions read the same way). An audit report also includes a statement that the international audit was conducted in accordance with GAAP. When the auditor cannot give an unqualified opinion, it issues a qualified opinion, which lists the reasons for the auditor's concern about the company's financial statements and controls and the possible effects on the financial statements. The auditor is not responsible for auditing transactions that occur after the date of the audit report.

Why It Matters

An audit's objective is to help the auditor form an opinion of the trueness and fairness of a company's financial statements. This is done for the sake of the shareholders, regulatory authorities, lenders, and other people with an interest in the health of the company.

There is always a chance that an auditor gives an unqualified opinion when in fact the financial statements are materially misstated. This is called audit risk, and the auditor must use his or her judgment about how much is acceptable and what errors are material enough to warrant the restatement of the financials. In these situations, the definition of the word material becomes especially important, because shareholders, lenders, and other interested parties make crucial decisions based on the quality of the information in a company's financial statements.

It is very important to understand that auditors are not responsible for detecting all instances of fraud or financial misrepresentation. This is the responsibility of the management of the company. However, the auditor should conduct the audit in a manner that would reasonably detect at least some material misstatements caused by fraud or error. In those cases, the auditor should probe the issue and pursue the audit trail for questionable transactions. To mitigate these errors and problems, companies often have employees known as internal auditors who perform ongoing audit functions. These internal auditors review not only the company's financial statements but also the company's control practices and other critical operations and systems. Internal auditors are often, but not always, accountants.

Source: Investing Answers

audit

noun

English Language Learners Definition of audit

 (Entry 1 of 2)

: a complete and careful examination of the financial records of a business or person

: a careful check or review of something

audit

verb

English Language Learners Definition of audit (Entry 2 of 2)

: to check the financial records of (a business or person) : to perform an audit on (a business or person)

: to attend a course at a college or university without having to do any of the course work and without receiving credit

audit

noun
au·​dit | \ ˈȯ-dət \

Kids Definition of audit

 (Entry 1 of 2)

: a thorough check of business accounts

audit

verb
audited; auditing

Kids Definition of audit (Entry 2 of 2)

: to thoroughly check the business records of

Keep scrolling for more

audit

noun
au·​dit | \ ˈȯ-dət \

Legal Definition of audit

: a formal examination of financial records often to uncover fraud or inaccurate tax returns also : the final report of such an examination

Other Words from audit

audit verb

Keep scrolling for more

More from Merriam-Webster on audit

Rhyming Dictionary: Words that rhyme with audit

Thesaurus: All synonyms and antonyms for audit

Spanish Central: Translation of audit

Nglish: Translation of audit for Spanish Speakers

Britannica English: Translation of audit for Arabic Speakers

Comments on audit

What made you want to look up audit? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

important, real, or meaningful

Get Word of the Day daily email!

Test Your Vocabulary

Homophone Quiz

  • three-bears-two-of-them-look-like-theyre-whispering-to-a-third-bear-who-looks-chuffed-to-be-the-center-of-attention
  • In order to judge how people felt, the senator's office hired a firm to take a ______.
How Strong Is Your Vocabulary?

Test your vocabulary with our 10-question quiz!

TAKE THE QUIZ
SCRABBLE® Sprint

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!