Unit 4 Listen and Read:
What is an audit?
An audit is a process for testing the accuracy and completeness of information presented in an organization's financial statements. This testing process enables an independent certified public accountant (CPA) to issue what is referred to as an opinion on how fairly the agency's financial statements represent its financial position and whether they comply with generally accepted accounting principles (GAAP). GAAP is determined by the American Institute of Certified Public Accountants (AICPA). Board members, staff, and their relatives cannot perform audits because their relationship with the organization compromises their independence. The audit report is addressed to the board of directors as the trustees of the organization. The report usually includes the following: A cover letter, signed by the auditor, stating the opinion, as described above. The financial statements, including the statement of financial position (balance sheet), statement of financial activity (income statement), and statement of cash flows.