It is the responsibility of the company’s management is to prepare the company’s financial statements and related disclosures.
These audited financial statements are then verified and audited by an independent third party known as external auditors of the company and give their opinion on the basis of their findings as to the result of their audit from the procedures that they performed. The audited financial statements include:
- Examination and evaluation of financial record and expression of opinion on financial statement
- Audit of financial system and transaction including an evaluation of compliance with applicable statutes and regulation which affect the accuracy and completeness of accounting record
- Audit of internal control and internal audit function that assist in safeguarding asset and resources and assure the accuracy and completeness of accounting record
An audited financial statement is an important piece of information for investors and economists and judging the health of the company and the overall economy.
Purpose of Audited Financial Statement:
The fundamental principle of the audited financial statement is to provide independent assurance that management has, in its financial statements, presented a true and fair view of the company’s financial performance and position.
The audit ensures that company financial transaction is recorded properly on company books. While smaller companies may have just one-year audits on the other side larger companies and public corporations have numerous audits throughout the year or fiscal year.
TYPES OF AUDIT:
There are two types of audit.
Internal audit is responsible to get a check on the internal controls of the company. They are mainly reported to the management of the company. In fact, they are the employees of the company.
External auditors are independent and registered firms or companies who conduct an audit on the request of the company’s shareholders.
They are not bound to report to the management of the company. Their report is called audit report and the financial statements they on which they give their opinion are so-called audited financial statements.
Characteristics of Audited Financial Statements.
The following are the main characteristics of
The main characteristic of the audited financial statement is reliability. Reliability can be explaining as the guarantee given by an independent person about the accounts of an organization whether it reflects the true and fair view of the current position or not.
You can rely and take your decisions on the basis of information provided in audited statements.
The other characteristic of the audited financial statement is its completeness. You as a stakeholder in the company can believe that the financial statements after audit will be complete in all aspects and there will be no unrecorded assets, liabilities, expenses, or revenues.
True & Fair View:
You can believe in audited financial statements that they are presenting a true and fair view of the organization. And there will be no overstated sales or understated expenses. Which may lead to your decision falsely.
The purpose of gathering accounting data and compile in a structured form is to accommodate the stakeholder of the organization. So that the structure must be easily understandable to all the users.
International Accounting bodies specify models for all the main financial statements so that this information will be easy to understand.
The auditor always keeps this point in mind when verifying the balances of accounts. So the audited financial statements are easily understandable for every user of the data. Because it follows a set pattern guided by a high level of accounting bodies.
Which parts of financial statements are audited?
There are five types of financial statements and five-element in the financial statements. These financial statements are prepared regularly and in accordance with accounting standards.
When the auditor issues the opinion on the financial statements that they are auditing, that means they issue to the whole of financial statements, not only the specific part, except the audit is the agreed-upon procedures.
Why do financial statements need to be audited?
There are many reasons why financial statements need to be audited. Most of the case, the financial statements need to be audited due to the statutory requirement, shareholders, management, as well as donors.