What is a Financial Statement Audit?

A Financial Statement Audit involves an independent auditor thoroughly examining the financial statements of an organization to provide assurance that these statements are free of material misstatement and accurately reflect the financial position and performance of the entity in accordance with applicable accounting standards. This process usually encompasses a variety of audit procedures, including evaluating internal controls, testing transactions, and confirming balances. The goal is to enhance the reliability of the financial information presented to stakeholders such as investors, creditors, and regulatory agencies.

By contrast, a review of internal controls focuses primarily on how well an organization manages its financial processes and safeguards its assets, without necessarily assessing the actual financial statements. An assessment of tax compliance pertains to evaluating whether an organization adheres to tax laws and regulations, which is distinct from auditing financial statements. A compilation of financial data involves preparing financial information without an audit or review, thus lacking the level of scrutiny and assurance provided in a financial statement audit.