Examination of the records and reports of an enterprise by accounting specialists other than those responsible for their preparation. Public auditing by independent accountants is common in large firms. The auditor performs tests to determine whether the firm's statements were prepared in accordance with acceptable accounting principles and that they fairly present its financial position and operating results. Personal tax audits are carried out to determine whether people have accurately reported their financial circumstances when filing their taxes. Failing such an audit may result in a fine, or, in cases of extensive and deliberate deception, criminal prosecution. Seealso Internal Revenue Service.
Learn more about audit with a free trial on Britannica.com.
Traditionally audits were mainly associated with gaining information about financial systems and the financial records of a company or a business (see financial audit). However recently auditing has begun to include other information about the system, such as information about environmental performance. As a result there are now professions that conduct environmental audits.
In financial accounting, an audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person or persons, known as auditors or accountants, who then issue an auditor's report on the results of the audit.
Such systems must adhere to generally accepted standards set by governing bodies that regulate businesses. It simply provides assurance for third parties or external users that such statements present 'fairly' a company's financial condition and results of operations.
There are many other audit firms competing with the big four for major audit engagements. Competition has intensified in response to independence issues and other legislative requirements introduced as a consequence of the Arthur Andersen Scandal. In the US and Australia, these firms are referred to as "mid-tier". Some of these include: Moore Stephens LLP, Grant Thornton International, McGladrey & Pullen, Protiviti, Dauby O'Connor & Zaleski, LLC, PKF, Pitcher Partners, Johnson Lambert & Co. LLP, Beard Miller Company LLP (bmc), BDO Seidman, DFK International, Horwath International, and UHY firm.
In the UK the medium sized firms are also referred to as mid-tier. Many of these firms are international and increasingly are competing for work against the Big Four, especially following the recent large auditing scandals.
While the four major audit firms listed above provide audit services to the largest corporations in America, audit firms around the world are also in partnership with the Big Four. Since corporations held offices in other parts of the world, they tend to be audited by affiliates of the Big Four to maintain consistency and uniformity in their application of auditing standards.