What is a financial statement audit?

A financial statement audit is an objective evaluation of a company's financial statements and the accompanying disclosures to ensure accuracy and compliance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). This process involves thorough examination and verification of the statements, which include the balance sheet, income statement, and cash flow statement, among others. The auditor assesses whether the financial statements present a true and fair view of the company's financial position and performance, identifying any discrepancies or issues that may exist.

This type of audit is critical for stakeholders such as investors, creditors, and regulatory agencies as it provides an assurance of the reliability of the financial information that businesses present, which is vital for making informed decisions. Other options, while related to different areas of business assessment, do not pertain to the specific purpose and process of an audit of financial statements. They focus on employee performance, market evaluations, or leadership assessments, which are distinct from the financial reporting and auditing processes.