Certified Government Financial Manager (CGFM) 2026 – 400 Free Practice Questions to Pass the Exam

The type of external audit that provides reasonable assurance that financial statements are presented fairly in accordance with Generally Accepted Accounting Principles (GAAP) is a financial audit. This type of audit focuses specifically on the accuracy and reliability of an organization’s financial statements, ensuring that they provide a true and fair view of the financial position and performance of the entity.

In a financial audit, auditors evaluate various aspects of the financial reporting process, including transactions, account balances, and disclosures in the financial statements. The goal is to identify any material misstatements or deviations from GAAP. When auditors conduct a financial audit, they carry out detailed testing and verification procedures that culminate in an auditor's opinion on whether the financial statements are free from material misstatements.

The other types of audits serve different purposes. A performance audit assesses the efficiency and effectiveness of a program or operation, a compliance audit evaluates adherence to laws and regulations, and an operational audit reviews the internal controls and operations of an organization. While these audits may also provide valuable insights, they do not specifically focus on assuring that financial statements comply with GAAP, which is the primary aim of a financial audit.