What does an audit involve?

An audit primarily involves an examination of a company's financial statements and records to ensure their accuracy and compliance with accounting standards and regulations. This process entails a thorough review of various financial documents, such as balance sheets, income statements, and cash flow statements, verifying their completeness and correctness.

During an audit, professional auditors may assess internal controls, review transaction processes, and corroborate financial data against supporting evidence. This is essential for stakeholders, such as investors and regulators, as it helps provide assurance about the integrity of the financial statements. The goal is to identify any discrepancies or irregularities that could affect the company's financial health or reporting.

Auditors not only evaluate past performance but also help in establishing confidence in the financial information that the company presents. This distinction illustrates why the other options are less relevant to the concept of an audit, which is specifically focused on financial accuracy and compliance rather than competitive market analysis, future earnings predictions, or employee evaluations.