A financial audit is defined as an independent examination of financial information. This process involves a thorough assessment by a third party, typically an auditor, who evaluates the accuracy and fairness of a company’s financial statements. The primary objective is to ensure that financial reporting is precise and complies with accounting standards and regulations. This independent nature of the audit adds credibility to the financial statements, instilling confidence in stakeholders, including investors, creditors, and regulatory agencies.
In contrast, an internal review of business operations focuses more on the operational aspects and efficiency within a business rather than the accuracy of financial reports. Budget planning involves the allocation of resources and financial planning for upcoming periods, while financial forecasting utilizes historical data to make projections about future financial performance. Each of these processes serves a distinct purpose in financial management but does not encompass the comprehensive and independent nature of a financial audit.