What is a ‘Legal Audit’
A legal audit is a required legal review of the accuracy of a company’s (or government’s) financial statements and records. The objective of a legal audit.
Determining whether an organization provides a fair and accurate representation of its financial position by examining information, such as bank balances, accounting records, and financial transactions.
For example, a state law may require all municipalities to undergo an annual statutory audit that examines all accounts and financial transactions and makes the results of the audit available to the public. The purpose of this audit is to hold the local government accountable for the way it spends taxpayers’ money. Many government agencies participate in regular audits.
This helps ensure that funds directed by the largest government entity, such as at the federal or state level, have been used appropriately and in accordance with the laws or associated requirements for their use.
Being subject to a legal audit is not an inherent sign of wrongdoing. Instead, it is often a formality designed to help prevent such activities, such as misappropriation of funds, by ensuring periodic review of various records by a competent third party. The same applies to other types of audits.
OPENING ‘Legal audit’
Understand the statutes
The statutory term is used to indicate that the audit is required by the statute. A statute is a law or regulation enacted by the legislative branch of the partner government of the organization. Bylaws can be enacted at multiple levels, including federal, state or other municipalities. In business, the statute may also refer to any rule established by the leadership team or the board of directors of the organization.
Understand an audit
An audit is an examination of records held by an organization, company, governmental entity or individual. In general, this involves the analysis of several financial records, but it can also be applied to other areas. During a financial audit, the records of an organization with respect to income or profits, returns of investments, expenses and other elements may be included as part of the audit process.
The objective of a financial audit is usually to determine if the funds were handled properly and if all the records and records required are accurate. At the beginning of an audit, the auditing entity reports what records will be required as part of the examination. The information is collected and provided as requested, allowing the audit entity to perform its analysis. If inaccuracies are found, the appropriate consequences can be applied.