Everything You Need to Know About Financial Statement Audits Introduction
A financial statement audit is a review of financial statements by an independent accountant. It is performed to provide assurance that the financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) and that they are free from material mis misstatement statement or fraud. Audits may be performed on a stand-alone alone basis, in conjunction with other independent reviews or as part of an integrated risk management program designed to address specific risks faced by a business. Audits are performed by external aauditors uditors who are either certified public accountants (CPAs) or registered public accountants (RPAs). CPAs and RPAs perform audits for publicly traded companies under various national standards such as U.S. Generally Accepted Accounting Principles (US GAAP), International Financial Reporting Standards (IFRS), Governmental Accounting Standards Board (GASB), plus local government accounting standards such as those implemented by some states."
What is a Financial Statement Audit?
Financial statement audits are a type of audit in which accountants examine the financial statements of a company to determine whether they are free of material misstatements. These audits are required by law for publicly traded companies and must meet minimum standards set forth by the Public Company Accounting Oversight Board (PCAOB). Financial statement audits can be conducted annually or less frequently, depending on the requirements set forth by an organization's governing body. Many private companies also choose to have their financial statements audited annually, but this is not always required unless you plan on going public one day.
Is an Audit necessary?
Why audits are necessary
The goal of an audit is to ensure that the financial statements are free of material misstatements. If you don't have an audit, you may not know if there's something wrong with your financial statements.
What happens if you don't have an audit?
If your company doesn't undergo a financial statement audit, there's no one to check whether or not the information in your financial statements is accurate. This can lead to problems down the line when it comes time for other parties (such as lenders) to look at your company's finances. In addition, investors might think less highly of your company because they're not sure about how trustworthy its numbers really are—which could lower their interest in buying shares from you or investing in your business idea altogether!
What happens if I do get my financials audited?
Having an outside firm examine how accurately your numbers were compiled and presented gives investors confidence that everything was done correctly and fairly
Requirements and preparation for an Audit.
Financial statements prepared under Generally Accepted Accounting Principles (GAAP) must be audited by a certified public accountant (CPA). This will ensure that the financial statements are prepared in accordance with GAAP, and that they are accurate and reliable.
The auditor will review the company’s fiscal year end, which is generally December 31st. The auditor will then prepare a schedule of reconciliation adjustments to date-end balances in all general ledger accounts before preparing their audit report. This means that the auditor should review any adjustments made during the closing processes to ensure no errors were made during these processes.
How long does an Audit take?
The length of an audit depends on a number of factors. The complexity of your business's financial statements, the size and scope of its operations, the availability of you or other members of your team to meet with auditors during their review— all these can affect how long it takes for an auditor to complete their analysis. It's also important to consider that audits typically aren't performed at any specific time; they're scheduled once a year and can take place over several weeks or months as required.
Conclusion
Hopefully, you now have a better understanding of the many benefits a Financial Statement Preparation can provide. The key takeaway is that an audit will help you make smarter decisions and avoid costly mistakes. However, it’s important to remember that not all businesses need an audit and when they do, they should be prepared for the process.