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

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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.
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Recent Examples on the Web: Noun

But any new analysis should be conducted only with a full independent audit and with publicly available performance data that could be replicated by independent scholars, the researchers said. Jeré Longman, New York Times, "Did Flawed Data Lead Track Astray on Testosterone in Women?," 12 July 2018 Earlier this year, a state audit found several large law enforcement agencies in California — including the Los Angeles Police and Orange County Sheriff’s departments — were not properly tracking hate crimes. James Queally, latimes.com, "Hate crimes rise in California for third straight year, state report says," 10 July 2018 Azar said the new number reflects a case-by-case audit of about 11,800 migrant children in its care, over a longer time frame. BostonGlobe.com, "US to reunite immigrant families as controversy rages," 5 July 2018 The Office of Insurance Regulation initially set a June 1 deadline for the company to submit a third-party audit of all payments made by the company to Mike Gold. Ron Hurtibise, Sun-Sentinel.com, "People's Trust Insurance gets second extension to submit audit of former CEO's spending," 19 June 2018 That money is a good sign for a bill by Assemblyman David Chiu, D-San Francisco, that calls for the state to count all untested rape kits in a one-time audit. Melody Gutierrez, San Francisco Chronicle, "California lawmakers OK budget with more money for schools, homelessness," 14 June 2018 Why didn't the FBI go and look at the server at the DMC and do a forensic audit. Fox News, "Did an administration infiltrate the opposition's campaign?," 26 May 2018 Members of squad 1 at Orland Park’s Centennial Park Aquatic Center were on duty when an unannounced safety audit was conducted by StarGuard Elite. Staff Report, Daily Southtown, "Sports calendar," 10 July 2018 Other provisions would guarantee election audits and reinstate straight-ticket voting, which Republican lawmakers and Gov. Rick Snyder banned in 2016 but has continued during a pending legal challenge. David Eggert, Detroit Free Press, "Group submits signatures for ballot measure to expand voting in Michigan," 9 July 2018

Recent Examples on the Web: Verb

Marketers sometimes can manually audit digital ad campaigns, but proponents of blockchain say the technology offers a faster, more reliable way to track spending and reconcile discrepancies with suppliers. Lara O’reilly, WSJ, "Big Advertisers Embrace Blockchain to Root Out Digital Spending Waste," 12 July 2018 Buy Photo Philadelphia’s controller will audit the way the Parking Authority staffs and spends money on salaries for on-street parking enforcement. Jason Laughlin, Philly.com, "Philly's controller to audit PPA's parking enforcement," 11 July 2018 At the request of the House Infrastructure and Transportation Committee, the Department of Transportation will audit the FAA’s evacuation standards. Cailey Rizzo, Fox News, "FAA declines regulation of minimum airplane seat size," 7 July 2018 Since the Cambridge Analytica scandal broke, Facebook has audited thousands of apps that had access to data during the looser period prior to 2015. BostonGlobe.com, "FBI, SEC also investigating Facebook and Cambridge Analytica," 3 July 2018 Since the Cambridge Analytica scandal broke in March, Facebook has audited thousands of apps that had access to data during the looser period prior to 2015. Elizabeth Dwoskin, The Seattle Times, "Facebook’s disclosures under scrutiny as federal agencies join probe of tech giant’s role in sharing data with Cambridge Analytica," 2 July 2018 The Ohio Department of Taxation audited the Reds for purchases the club made from 2008 through 2010. Dave Clark, Cincinnati.com, "Ohio Supreme Court to consider whether Reds' giveaways should be taxed," 5 June 2018 The office randomly audits about 2 percent of the 200,000 contractors who do business with the federal government each year. Alexia Fernández Campbell, Vox, "The Trump administration wants to make it easier for federal contractors to hide pay discrimination," 24 Apr. 2018 Some people may often decide to hire an accountant out of fear of filing incorrectly and getting audited, but the IRS rarely asks for an in-depth scouring of people's taxes. Judith Ohikuare, refinery29.com, "Should You Hire An Accountant To Help With Your Taxes?," 13 Mar. 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.

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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, from Latin auditus act of hearing, from audire — see audible entry 1

Verb

see audit entry 1

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Statistics for audit

Last Updated

24 Sep 2018

Look-up Popularity

Time Traveler for audit

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

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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

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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

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Comments on audit

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