What is a financial audit?

A financial audit is defined as an independent examination of financial information of any entity, whether profit-oriented or not. This process involves evaluating the accuracy and validity of financial statements, assessing compliance with accounting standards and regulations, and determining the overall financial position of the entity being audited.

The role of an independent auditor is crucial as it enhances the reliability of financial reports that stakeholders, such as investors, creditors, and regulatory bodies, rely on to make informed decisions. By performing an objective review, auditors provide assurance that the financial statements present a true and fair view of the organization's finances.

In contrast, the other options focus on narrower aspects of finance or business analysis that do not capture the comprehensive nature of a financial audit. For example, examining personal bank statements, reviewing tax returns, or analyzing marketing strategies are not considered financial audits; they are specific activities that serve different purposes in personal finance or business operations.