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 An independent audit of Mayo Clinic financials is published every year. Jeff Kiger, Twin Cities, "Mayo Clinic reports total revenue of $12.6 billion in 2018," 26 Nov. 2019 An Organization of American States audit of the vote found widespread irregularities. Fox News, "Bolivia's political crisis sparks dangerous clashes, 8 killed," 17 Nov. 2019 HireVue said its board of expert advisers regularly reviews its algorithmic approach, but the company declined to make the system available for an independent audit. Drew Harwell, Anchorage Daily News, "Face-scanning algorithm increasingly decides whether you deserve the job," 22 Oct. 2019 The independent management audit was ordered as part of a 586-page decision issued late last month in which DPU approved a $90.4 million increase in National Grid’s base distribution rates. BostonGlobe.com, "In blunt terms, regulators said the rare, but not unprecedented audit was necessary to examine “potential management problems through to the highest levels of the organization.”," 12 Oct. 2019 Google is already under a 2011 agreement with the FTC that barred it from misrepresenting its privacy policy and subjected the company to 20 years of regular, independent privacy audits. Marcy Gordon, chicagotribune.com, "YouTube ordered to pay $170M in fines after violating kids’ privacy law," 4 Sep. 2019 Republican lawmakers, who have been highly critical of the DMV’s woes and unsuccessfully sought an independent state audit of the agency last year, had a mixed response to the changes Newsom announced. Alexei Koseff, SFChronicle.com, "Tech dinosaur California DMV gets dose of Silicon Valley in hopes of fixing it," 23 July 2019 At one point, the insurers had used recommendations generated by the Strat 11 program to invest nearly $13 billion, according to an independent audit... Justin Baer, WSJ, "SEC Examines Guggenheim-Related Bond Trades," 26 Feb. 2019 The following day, the Organization of American States announced that its preliminary audit of the Oct. 20 had found serious irregularities. Washington Post, "AP Explains: Did a coup force Bolivia’s Evo Morales out?," 11 Nov. 2019 Recent Examples on the Web: Verb In the majority of cases—783 of the at-risk Superfund sites—sea level rise and flooding pose the biggest risks, according to the GAO, a nonpartisan branch of the federal government that audits agencies and federal spending. Zoë Schlanger, Quartz, "Climate change threatens 945 US toxic waste sites with flood and fire," 20 Nov. 2019 The former group’s likelihood of being audited has fallen from about 8 percent in 2011 to more like 2 percent today. Robert Verbruggen, National Review, "Enforce the Tax Laws We Already Have," 19 Nov. 2019 But there is no standardized way of measuring it, and Alibaba’s Nov. 11 figures are not audited. BostonGlobe.com, "Alibaba says Singles Day in China was another hit - The Boston Globe," 12 Nov. 2019 Hoelscher noted that the last time Ruble audited a reconstruction class was in 2002. Elizabeth Zavala, ExpressNews.com, "Deliberations to continue Monday in murder trial of man with DWI convictions," 25 Oct. 2019 The data on the website are based on each city’s audited financial statement for the 2016-17 fiscal year, which is a problem in itself, the auditor said. John Wildermuth, SFChronicle.com, "These Bay Area cities are in financial trouble, state says," 24 Oct. 2019 Voting on paper, by contrast, is well studied and easily verified and audited. Nir Kshetri, The Conversation, "Blockchain voting is vulnerable to hackers, software glitches and bad ID photos – among other problems," 18 Oct. 2019 And a third requires a response, or the recipient will be audited. Anna Bahney, CNN, "IRS is going after cryptocurrency users with warning letters about back taxes," 26 July 2019 According to one estimate by auditing firm PricewaterhouseCoopers, China’s box-office income could overtake the US in 2020. Echo Huang, Quartzy, "China’s censorship is sinking its own movie market," 17 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

3 Dec 2019

Cite this Entry

“Audit.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/audited. Accessed 5 December 2019.

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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

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