CGFM Practice Exam 2025 – Complete Guide for Exam Prep

The correct choice highlights that compliance audits are indeed one of the recognized types of external audits. External audits serve to provide an independent assessment of an organization's financial statements, compliance with laws and regulations, and overall performance.

Financial audits focus primarily on the accuracy of financial statements, ensuring that they fairly present the organization’s financial position in accordance with relevant accounting principles. Performance audits assess the efficiency and effectiveness of an organization's operations, often looking at program outcomes and resource management. Attestation engagements combine elements of compliance and financial audits, as they involve an evaluation of a specific subject matter, providing a level of assurance regarding that matter.

In this context, compliance audits are essential as they verify whether an organization adheres to applicable laws and regulations, which is a core function of external auditing. Therefore, indicating that compliance audits are not among the types of external audits is a misunderstanding of audit classifications.