audit
Definition
An audit is a formal review where someone examines your financial records to verify that your numbers are accurate and that you followed the rules. A government agency like the IRS might audit your taxes, or an outside accountant might audit your books to confirm your financial statements are trustworthy.
Example
If the IRS selects your business for an audit, they will request bank statements, receipts, and other documents to confirm that the income and deductions on your tax return are accurate.
Watch Out
Keep organized financial records for at least seven years because an audit can happen long after you filed your taxes or closed a business deal.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.