What is a financial audit?

A financial audit is fundamentally an examination of an organization's financial statements and operations, conducted to assess the accuracy, completeness, and fairness of the financial reporting. This process involves a thorough review of financial records, compliance with accounting standards, and an evaluation of internal controls. The audit provides assurance to stakeholders, such as investors, creditors, and regulatory agencies, that the financial statements present a true and fair view of the organization's financial position and performance.

The emphasis on examining both financial statements and operations makes this answer distinct; it doesn't solely focus on different aspects like internal practices, tax preparation, or employee records. These other options, while relevant in certain contexts, do not encapsulate the broad and critical purpose of a financial audit as it relates to validating the financial health and compliance of an organization.