What is a Credit Check?

Credit audit refers to a series of audits on credit conducted by auditors for relevant stakeholders.

Credit audit

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Credit audit means

Credit audit means

The main purpose of a credit audit is to analyze and evaluate the financial status and operating conditions of borrowing companies, to understand the possibility of recovering their claims, and to provide the necessary basis for banks and other lending institutions to decide whether to grant corporate loans. In the early twentieth century, balance sheet audits, as a form of credit auditing, were popular in the United States. Because the short-term financial method was dominant in the United States at the time, credit grantors concerned about the ability of borrowing companies to repay short-term debt believed that:

The main measure of the financial liquidity of an enterprise is not the most important data for the sales ability of inventory assets, rather than the period profit. The balance sheet that reflects the financial liquidity of the borrowing company is an important information for judging its solvency.

Therefore, for credit purposes, a credit audit is required. Credit audits in countries around the world are not limited to reviewing balance sheets, but also attach importance to reviewing other financial statements such as profit and loss statements (income statements).