Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They run on blockchain networks, executing transactions when predetermined conditions are met without the need for intermediaries. A smart contract audit is a systematic examination of the code, logic, and overall design of a smart contract to ensure its security and functionality. The audit process often involves code reviews, automated testing, manual testing, and analysis of system design to ensure that the contract behaves as intended and does not contain vulnerabilities that could be exploited.