What is the definition of a financial audit in the public sector?

A financial audit in the public sector is defined as an independent evaluation of financial statements. This process involves examining an organization’s financial reporting, accounting practices, and compliance with relevant laws and regulations. The primary goal of a financial audit is to ensure the accuracy and integrity of financial information, thus enhancing accountability and transparency in public sector financial management.

This independent evaluation is critical because it provides stakeholders—such as government officials, taxpayers, and oversight bodies—with assurance that the financial statements are free from significant misstatement and truly reflect the financial position of the entity being audited. The findings of a financial audit can also highlight areas for improvement in financial practices, policies, and internal controls, thereby contributing to better governance and risk management in the public sector.