Audited financial statements are prepared by a CPA on behalf of an organization using source documents provided by the organization. The statements include an opinion from the accountant, either unqualified or qualified, and are presented annually to interested parties.
As part of the financial accountability that most entities provide to investors, board members and constituents, the use of audited financial statements is common. In essence, these statements are simply the accounting documents that are prepared by a certified public accountant (CPA) on behalf of a business or non-profit organization.
Source documents for audited financial statements are typically provided by the organization that wants an auditor to prepare a financial statement. This will often include a wide variety of documents, such as debit and credit information, expense reports, budgets and any other type of financial record that the organization has in its possession. The accountant will take these various financial statements, evaluate and compare them, and provide a professionally prepared statement that the organization can then present to interested parties.
Audited financial statements generally include a document called an opinion. It is the accountant’s responsibility to provide an unqualified opinion or a qualified opinion. An unqualified opinion essentially states that, in reviewing the documents submitted by the organization, the accountant agrees with the methods used to prepare those documents. Indeed, the accountant claims that the check is accurate and complete.
When issuing a qualified opinion, the accounting officer indicates that he does not agree with the methods used to prepare the supporting financial documents. This doesn’t necessarily mean that the accountant thinks something unethical is going on. However, it could mean that the accountant has encountered instances where expenses should have been assigned to a different category, or errors have been found in line items, such as transposed figures.
From time to time, an accountant doesn’t feel free to express an opinion. This may mean that the records provided were not sufficient to prepare adequate returns or that there were a number of issues which should have been addressed before the accountant could assess the accuracy of the information provided. Generally, when an accountant refuses to issue an opinion, the organization needs to reorganize its internal accounting procedures so that it can operate according to normal and appropriate accounting principles.
Audited financial statements are often prepared on an annual basis and are presented to individuals or groups who have an ongoing interest in the organization. Companies typically make them available to investors, senior executives, and the board of directors. Non-profit organizations may choose to share statements with members, operational staff, key departmental leaders, and other members of any existing governing body within the organization.
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