The which standards the financial statements have
The purpose of financial statement audit is to determine the fairness of an entity’sfinancial statements according to the GAAP(Generally Accepted AccountingPrinciples), by an independent auditor.
Fairnesshere can be broken down as the financials beingpresented are correct and in the proper formats/methods.AFinancialstatement audit report simply isthe document through which the auditor or the accounting audit service presentstheir findings in a standardized manner.Why Do You Need Financial Audits? Financialstatement audits are needed to assurevarious stakeholders such as financial institutions, management, and the tax authorities that the financialstatements are prepared correctly andthat there is no misreporting.
Auditingaccounting statements can also help present aclearer picture to the suppliers about the company’s ability to paythem. Banks and other financial institutions can use it to establish creditworthiness and the potential for investment.Elements of the Financial Statement Accounting Audit ReportReport TitleThetitle of the report should contain the date of the report. This is usually the last date of the fieldwork. It shouldalso mention the addressee of the report, whois usually the shareholders or the boardof directors.Mentioning”Independent” in the title helps distinguish it from internal audits.
Opening or Introductory ParagraphThisparagraph is to inform that an audit has taken place, it mentions the financialstatements that have been audited, mentioning the relevant period for which the audit istaking place.Thisparagraph also emphasizes that the responsibility of the financial statementslies with the entity’s management entirely and that the auditor’sresponsibility is to review the statementspresented and provide an opinion on the basis ofsaid audit.Scope ParagraphThescope paragraph mentions that the audit has taken place according to the generally accepted accounting practices for thecountry according to which standards the financial statements have been prepared. Italso states that the audit was done to provide reasonable assurance that thefinancial statements were free of misstatementsince a guaranteed assurance is difficultdue to certain limitations of the audit. Italso needs to state that the auditors assessed the accounting principles usedand the significant estimates made by the entity’s management while preparingthe financial statements.
Opinion ParagraphTheopinion paragraph specifies the financial reporting framework as per which thefinancial statements have been preparedand whether they have been made compliant withthat framework. Whether it isInternational accounting standards or those of a specific country, the framework ismentioned clearly.Theterminology generally used is that the financial statements “give a true and fairview of ” or “are prepared in accordance with theframework {GAAP} for instance.ForEg.
Accounting firms here in Mississauga or Canada, in general, would mention either IFRS orASPE depending on whether the company is listed or not, as these are the GAAPin Canada. Date of Report The report prepared by the auditor should be dated as of the completion dateof the audit. This signifies that theauditor has taken into consideration any events that could impact financialstatements up to that date.Thereport should not be dated before theapproval date of the financial statements by the management.Auditor’s Name & address The auditor needs to print his name at the endof the audit and. There should be a mention of the accounting firm he works foras well, along with the location /address of the firm.
ForEx.Mr. ABC XYZ Accounting Audit Firm GTAAuditor’s SignatureThereport must be signed off by the auditor and/orin the name auditing accounting firm theauditor represents as the responsibilitywill eventually lie with the firm.Theseare the general components of a financial statement audit report.There might be some differences, and somethings might need to be mentioned as perthe specific country or location’s legislation.
TakeawayFinancialstatements are key indicators of acompany’s health and are equally importantfor meeting respective compliance norms anywhere in the world. Choosing theright accounting audit service providers therefore is a critical decision and should bemade after careful deliberation.
