Glossary: Audit (Of Financials)

Image courtesy of user stevepb on
Image courtesy of user stevepb on

In financial accounting, an audit refers to a CPA firm reviewing a company’s financials and internal controls, and reviewing documentation to verify the amounts shown on the financials.

The firm then issues an audit report saying (hopefully) that the financials fairly present the financial position of the company and that the financials are kept in accordance with generally accepted accounting principles.

Only CPAs can conduct audits and issue audit reports. For example, I am a licensed public accountant (LPA) rather than a CPA. As such, I cannot do audits.

Does a typical small business need an audit? The answer is generally “no.”

Audits are required of publicly traded companies. Larger privately held companies may want an audit. The typical main-street small business won’t need an audit unless it’s required by a bank or by investors.