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The Ins and Outs Of A Financial Statement Audit Report

Aug 17, 2007
An accounting audit report gives the complete financial perspective of a company, and is prepared at the end of the financial year. This document is of use to all who want an exact picture of the functioning of the company. The aim of this document is to provide insights into the functioning as well as profitability and viability of the company as a commercial enterprise. The benefit to those who study this report is that they get the real picture from studying all the information that it holds, which is certified to be true and materially accurate.
The reporting period is referred to as a financial year and this pertains to the start of the accounting year i.e. the day following the end of the previous financial year. In case of a new company, this is the day of formation of the new company.

Preparation and filing of accounts
The procedure of filing audit reports applies to all public companies, even if they are filing for exemptions based on the contents of the report. Every company, be it public or private, has to keep accounts of its existence and performance. The accounts prepared must include:

1. Profit and Loss account
2. Balance Sheet
3. Auditors report
4. Directors report duly signed by either a director or a secretary of the company
5. Group accounts, in case of a group of companies

The auditor is an individual or a firm appointed to scrutinize and prepare the complete financial position of the company via its performance for the financial year. There are both public and private companies that carry out audits and prepare the accounting audit reports. The accounting report deals with all the operating and financial aspects of the company.

In the United Kingdom, all companies, limited and public limited, must submit their accounts to the Registrar of Companies. In the United States, the report is to be submitted to the Securities Exchange Commission though private companies do not need to do this. Incorporating a company varies from state to state.

The duties of the auditor involved in preparing accounting audit reports are as follows:

1. Financial statements and Reporting process
Must review and discuss with external auditors and management of the Company the interim financial statements

2. Risk management and Internal controls
Must review and monitor the integrity of the Company's internal control system. Discuss Company guidelines and policies pertaining to risk management, risk assessment and internal control.

3. Auditor qualifications and their independence and effectiveness
To consider and recommend to the Board appointing, reappointing, removing and remunerating external auditors of the Company.

Associations such as AICPA have, through the Auditing Standards Board, issued a number of statements relating to the assessment of risk in auditing financial statements. These statements are the foundation for setting standards and give some much needed guidance with regard to auditor's assessing risks of material untruths (either fraudulent or erroneous) in financial statement audits. It also needs to design and perform audit procedures which are responsive to the assessed risks.

Those interested in evaluating the performance of a company will need the accounting audit report to form a considered opinion. Using this report can make them invest in the shares of the company or for the bigger business heads, decide whether to potentially purchase a company or not.
About the Author
Wade Anderson is a CPA and operates DigitalWorkTools.com

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