audit

noun
au·​dit | \ ˈȯ-dət How to pronounce audit (audio) \

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 How to pronounce auditability (audio) \ noun
auditable \ ˌȯ-​di-​tə-​bəl How to pronounce auditable (audio) \ adjective
auditee \ ˌȯ-​də-​ˈtē How to pronounce auditee (audio) \ 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 Evaluations are used to examine the actions of HUD and are typically broader than narrowly focused audits. oregonlive, "HUD’s independent watchdog launches review of radon policies after Oregonian investigation," 19 Mar. 2020 And even precincts and states that have the records to perform audits often don't have policies in place to actually carry them out. Lily Hay Newman, Wired, "Kill Chain: HBO's Election Security Doc Stresses Urgency," 16 Mar. 2020 However, officials did note that the agency would be conducting random audits to ensure that students are receiving adequate amount of daily instruction. Dallas News, "Texas schools cancel classes and scramble to continue instruction amid COVID-19 concerns," 13 Mar. 2020 Some states still don’t have paper backup ballots or required audits. John Walcott, Time, "U.S. Cyber Officials Monitor Voting Amid Russian Disinformation Campaign," 4 Mar. 2020 Investigators said that in late December audit logs showed a shift in Thompson's pattern of access to classified information in computer databases. Pete Williams, NBC News, "Defense contractor gave info to romantic interest who has ties to Hezbollah, feds say," 4 Mar. 2020 Fictitious vendors, the audit states, were paid more than $300,000. al, "Montgomery school officials spent $700,000 in public funds on liquor, gambling, strip clubs," 24 Feb. 2020 Patagonia has an in-house factory-audit program and participates in a number of fair-labor programs. Joe Lindsey, Outside Online, "The Dark Secrets Lurking Inside Your Outdoor Gear," 21 Feb. 2020 It finally got announced the same day, in May 2018, as the conservative bias audit. Craig Timberg, Anchorage Daily News, "How conservatives learned to wield power inside Facebook," 20 Feb. 2020 Recent Examples on the Web: Verb When corporate fraud sent markets plummeting in 2002, the nation's capital created an oversight board for accounting firms that audited public companies. Jay Heflin, Washington Examiner, "Coronavirus injects fear into stock markets," 12 Mar. 2020 On Monday, the government entity that audits public spending created a new whistle-blower program for employees and suppliers who suspect fraud. Time, "Amid Wave of Tax Fraud in Denmark, Social Worker Jailed For Embezzling $17 Million," 2 Mar. 2020 The lawsuit was filed by the department’s Office of Federal Contract Compliance Programs, which audits companies with government contracts worth more than $100 million a year. Nitasha Tiku, Washington Post, "Oracle allegedly underpaid women and minorities by $400 million. Now the details are set to come out in court.," 5 Dec. 2019 The first new tool is a password check-up tool that audits all of the passwords a Google account user has stored in Google Chrome. NBC News, "Google just upped its privacy game, will allow users to delete YouTube history, search privately in Maps," 2 Oct. 2019 The committee has maintained that its finances were independently audited, and that all money was spent in accordance with the law. Time, "D.C. Sues Trump's Inaugural Committee, Claiming It Coordinated With President's Family to 'Grossly Overpay' for Hotel Space," 22 Jan. 2020 To cut down on abuse, there's a small, random chance of any given transaction being audited. Kate Cox, Ars Technica, "I broke Giant’s handheld scanner system by only buying two things," 13 Jan. 2020 While airlines in the former Soviet Union generally have poor safety records, Ukraine International Airlines said on its website that its safety was audited and met F.A.A. standards for code-sharing flights with foreign partners. David Gelles, New York Times, "Little Clarity, Many Theories in Ukraine Airline Crash in Iran," 7 Jan. 2020 Glint is an agent of Sutton Bank, and the accounts are regulated under the Federal Deposit Insurance Corp. A customer retains ownership of his or her gold until it is spent, and the vault holdings are audited daily. Aldo Svaldi, The Denver Post, "Glint Pay promises consumers an easier way to transact in gold," 29 July 2019

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 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

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Time Traveler for audit

Time Traveler

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

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Statistics for audit

Last Updated

25 Mar 2020

Cite this Entry

“Audit.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/audit. Accessed 28 Mar. 2020.

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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
How to pronounce audit (audio)

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)
US : 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 How to pronounce audit (audio) \

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 How to pronounce audit (audio) \

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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More from Merriam-Webster on audit

Thesaurus: All synonyms and antonyms for audit

Rhyming Dictionary: Words that rhyme with audit

Spanish Central: Translation of audit

Nglish: Translation of audit for Spanish Speakers

Britannica English: Translation of audit for Arabic Speakers

Comments on audit

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