What Are the Content of an Audited Financial Statement? (Part 3)

An audited financial statement includes the following information:

CPA verification. Even if you meticulously track all your company’s spending and earning, you might make errors. When you hire a CPA to audit your financial statements, you minimize these errors and move your statement closer to complete accuracy.

On-site inspection. For an audited financial statement, a CPA will go over your financials with a fine-tooth comb, but sometimes, that’s not all. If parts of your financial statements include reports on your inventory, your CPA may also personally inspect your inventory to ensure no gaps in stock counts.

Internal control inspection. If your team includes employees who monitor your company’s spending – especially if these employees have little to no supervision or double-checking from other team members – your CPA may inspect their work. That’s because with so little everyday oversight, there’s always a chance (though maybe a tiny one) that these employees could be fudging your books or otherwise committing fraud.

Opinion letter
To summarize the above information, your CPA will provide an opinion letter detailing their perspective on your financial statements. There are four types of CPA financial statement opinions:

Unmodified opinion. Also known as an unqualified opinion, when a CPA gives this opinion, it means that you prepared your financial statements accurately using standard, acceptable bookkeeping and accounting practices.

Qualified opinion. If you receive this opinion, then your CPA thinks your financial statement preparation, accounting and/or bookkeeping have a small number of gaps. Your CPA will detail these problems and how you can fix them, and once you rectify your errors, you can seek an unmodified opinion.

Adverse opinion. This opinion signifies that your financial statements are inaccurate, with more than just a small, relatively insignificant number of gaps. It means that investors, lenders and other funders should not trust the information in your financial statements.

Here too, your CPA will explain your route for fixing your options and allow you to return for an unmodified opinion.

Disclaimer of opinion. This result is not an opinion, but a lack of one. It signifies that you haven’t given your CPA the access, information or time needed for a complete audit.

What is the difference between audited and unaudited financial statements?

When comparing audited and unaudited financial statements, you’ll notice the following key differences:

Creation. Any accountant can create an unaudited financial statement. Only a CPA can create an audited financial statement.

Trust. When you present an unaudited financial statement, the person reviewing your statement cannot entirely trust that it is accurate. An audited financial statement is, by definition, thoroughly and professionally reviewed, eliminating any doubts about its accuracy.

Time. An unaudited financial statement is fairly quick and simple to generate. Your accountant simply compiles all your financial information into one document. An audited financial statement, on the other hand, will likely take weeks or even months to complete.
Cost.

Unaudited financial statements cost less money to generate than audited financial statements. That’s because whether your in-house accounting team prepares them or you hire a third-party accountant, you won’t pay as much as you would to hire a CPA.

Legitimacy. When applying for additional business funding, you’ll likely need to present audited financial statements. Since unaudited financial statements don’t include a guarantee of accuracy, lenders and investors often do not consider them legitimate.

From these differences, you can see that the fundamental characteristic of audited financial statements is the involvement of CPAs. To learn more about how Victor Owonifari & Co an accounting and consulting firm established primarily to provide first class accounting and consultancy services to discerning clients? We are adequately staffed with highly experienced professionals who include chartered accountants and research fellows. Click Here to Get Started Today

Need Help To Maximize Your Business?

Reach out to us today and get a complimentary business review and consultation.