What is a tax audit?

A tax audit is fundamentally an investigation of tax returns and financial records conducted by tax authorities to ensure the accuracy and compliance of reported information. This process involves a thorough examination of the taxpayer's financial documents, including income statements, receipts, and other relevant financial data. The goal of the audit is to confirm that the taxpayer has reported income accurately and has claimed deductions or credits that are allowable under tax law.

By conducting an audit, tax authorities can identify discrepancies or issues that could indicate underreporting of income or improper claims. Audits serve as a means of enforcing tax compliance and can lead to adjustments in tax liabilities based on the findings. This definition aligns closely with the concept of a tax audit, emphasizing the analytical nature of the investigation into the taxpayer's overall financial conduct as it pertains to tax obligations.