External Audit
An independent examination of financial statements by certified professionals to provide objective assurance on fair presentation to external stakeholders.
External Audit
An independent examination of financial statements by certified public accountants or chartered accountants who are not employees of the entity being audited, designed to provide objective assurance about fair presentation to external stakeholders.
For example, a public company engages an independent accounting firm to conduct its annual external audit, examining financial records, testing transactions, evaluating controls, and issuing an opinion on whether the financial statements comply with applicable accounting standards and fairly represent the company’s financial position.
External audits fulfill statutory, regulatory, or contractual requirements, providing credibility to financial reporting. They follow standardized professional standards like Generally Accepted Auditing Standards (GAAS) or International Standards on Auditing (ISA). External auditors must maintain independence in fact and appearance, unlike internal auditors who report to management. The audit process typically includes planning, risk assessment, control evaluation, substantive testing, and concluding phases, culminating in an audit report with the auditor’s opinion. For public companies, external auditors also evaluate internal control effectiveness over financial reporting under regulatory frameworks like Sarbanes-Oxley Section 404.