What Is an Audited Financial Statement? (Part 1)

Applying for business funding, lenders and investors want to be sure they won’t lose money on the opportunities you present; that’s why you brought detailed financial statements to your pitch meeting. If however, the people you’re presenting to still feel uncertain about your company’s finances, that might be because you haven’t prepared an audited financial statement. Read on to learn what an audited financial statement is and how it differs from an unaudited financial statement.

What is an Audited Financial Statement?

An Audited financial statement is any financial statement that a Certified Public Accountant (CPA) has audited. When a CPA audits a financial statement, they will ensure that the statement adheres to general accounting principles and auditing standards. Without this CPA verification, inventors and lenders may not be confident that the statement you’re presenting is accurate.

How does an audited report differ from other types of accounting reports?

When you think of the word “audit,” the IRS might come to mind first. That’s because audits are often associated with the IRS investigating taxpayers for possible tax filing inaccuracies. As such, you might think of audits as punishment, but they’re not – for your financial statements, they can actually be beneficial, if not paramount.

To understand why, compare an audited report to two other types of accounting reports:

Compiled reports. Any accountant can prepare a compiled report, which is just a basic financial statement. It’s called a compiled report because your accountant generates it by compiling your financial records into a widely accepted financial statement format. However, in compiling this report, your accountant does not check whether the information you’ve given them is accurate and will say so in the report.

Reviewed reports. A reviewed report undergoes slightly more scrutiny than a compiled report. For these reports, your accountant will employ limited analytical procedures and submit a small number of inquiries to your management. Through this work, your accountant will determine whether your financial statements require substantial modifications. Your accountant will also verify that your company uses generally accepted accounting principles, but they will not test your protocols.

Audited reports. An audited report involves a thorough review of each and every item on a financial statement. It also entails internal protocol testing to ensure that money moves about your company in a way that your reports accurately reflect. As such, an audit is proof that your financial statements are fully accurate.

Who should prepare Audited Statements?
Any company presenting its financials to investors or lenders should prepare audited financial statements. The vast majority of potential funders for your company will request audited financial statements instead of unaudited ones since the latter leaves far less room for error.

Additionally, if your company is publicly traded, you’ll need to prepare annual audited financial statements. While federal regulatory bodies mandate that publicly traded companies file audited statements, you can regularly create unaudited ones throughout the year if they help you assess your finances.

Did you know thatVictor Owonifari & Co is a multidisciplinary 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.