What is a Financial Statement Audit?
A financial statement audit is an examination of a company’s financial statements to determine whether the presented information is a correct representation of a business’s activity and financial position according to the Generally Accepted Accounting Principles (GAAP) issued by the Financial Accounting Standards Board. A financial statement audit specifically looks for accuracy on an income statement, balance sheet, and statement of cash flows.
Audited Financial Statements vs. Other Accounting Reports
Audited financial statements differ from other accounting reports as each item on the document is closely examined for accuracy. Protocol testing is also performed to analyze whether finances within the business move in the same way as the organization lists on the document. Other financial reports, such as compiled reports lack the verification that audited reports provide and do not require protocol testing.
What to Include in an Audited Financial Statement
The purpose of auditing financial statements is to ensure that the documents are accurate and don’t contain mistakes, so it’s important to include the necessary fundamentals during an audit:
- Verification from a CPA: While a financial statement audit can be done by internal leaders, it’s best to have a CPA verify documents to ensure a reliable representation of the organization’s finances, especially when presenting information to external stakeholders and potential investors.
- On-Site Inventory Inspection: Financial statement audits can also be conducted on-site to verify details on a financial statement. Sometimes this is led by federal regulatory bodies, such as the IRS.
If you are preparing for a financial statement audit it’s always best to consult with a CPA to make sure everything is in order. The CPAs at JTS Associates are here to help. Contact us at (516) 877-5900.
