An audit is a review of your business. Public companies have regular audits to review their public financial statements. Colloquially, the term audit usually refers to an IRS Audit. The most feared part of tax enforcement, an audit is where a government forces you to prove out your claims, while an adversarial investigator challenges your actions.
This also includes the “letter audit,” where the IRS or State Revenue agency simply requests paperwork backing up something and then closes the issue. It can also include full blown tax reviews going back years looking for missing tax revenues.