An audit that is carried out by an external auditor as per the requirements of a statute– a statute is a law or regulation passed by a legislative authority in the country where an entity operates. A statute may also refer to any rules or articles set by an entity’s management or board of directors (e.g., articles of incorporation). An external audit is one of the main types of audit to be conducted as per the laws/ regulations applicable governing an entity’s business. This audit focuses on gathering all relevant information that enables an audit firm to express its opinion on the true and fair view of the entity’s financial position and performance as on the balance sheet date.

The auditor’s opinion is expressed independently without any influence from within the entity being audited (auditee) or from external parties. For that purpose, an auditor examines the financial accounts and statements of an auditee and provides its opinion in the audit report. An auditee may be an organization, business, government entity, or individual.

An external audit helps the stakeholders (users of financial statements, including shareholders and connected parties) to reliably depend on financial statements in their business and investment decisions, among others.

An external audit is also known as financial audit or statutory audit.