DEFINITION of 'Preaudit'

An accounting practice used prior to the official examination of the accuracy of an organization's financial statements. This preliminary phase of an audit is used to establish the scope of the audit and any special areas of concern. It is also used to gather background information and to request needed documents, records and information. A preaudit may be conducted in the form of a written questionnaire that the auditor gives to the auditee.


A preaudit is also a phase in which an IRS agent examines a tax return that has been selected for audit. Prior to beginning the audit, the agent must check the statute of limitations for the return, review the return, determine the scope of the audit, establish contact with the taxpayer, make an audit appointment with the taxpayer, explain to the taxpayer his rights and get him to sign form 2848, Power of Attorney and Declaration of Representative.

  1. Audit

    An unbiased examination and evaluation of the financial statements ...
  2. Unqualified Opinion

    An independent auditor's judgment that a company's financial ...
  3. Form 2848: Power of Attorney and ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  4. Unqualified Audit

    Also known as a complete audit. An audit that has been performed ...
  5. Independent Auditor

    A certified public accountant who examines the financial records ...
  6. Auditor's Report

    Recorded in the annual report, the auditor's report tests to ...
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  1. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  2. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  3. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  4. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>
  5. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  6. What can working capital be used for?

    Working capital is used to cover all of a company's short-term expenses, including inventory, payments on short-term debt ... Read Full Answer >>

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