An audit is when the accounting records of a company is inspected to verify if all the entries have been made as per accounting standards. Company laws across the world require periodic audits to scrutinize the records of a company, to keep a check on economic offences and to ensure true disclosure. Audit is usually carried out by professional accountants who belong to independent agencies.
In cash basis accounting, revenues are reported on the profit and loss statement when cash is received by a business. Similarly, expenses are reported when