Financial Audit Services By CPA’s In Clifton NJ
A financial statement audit is the examination of an entity’s financial statements and accompanying disclosures by an independent auditor. Once the examination is concluded, the results is a report by the auditor attesting to the fairness of the financial statements and related disclosures. The auditor’s report will accompany the financial statements when they are issued to the intended recipients.
The primary purpose of a financial statement audit is to add credibility to the reported financial position and performance of a business. It give supervisors, directors, managers and investors reasonable assurance that the financial statements are accurate and complete.
Who may require an audit of the financial statements?
- Lenders: They require said report of any entity to which they lend funds to.
- Suppliers: They also require said report before they will be willing to extend trade credit.
The audit is not intended to catch all errors, remove all risk or provide any guarantees. It will however provide a peace of mind that your records are reported properly and represents the financial condition of the company. It will also help you identify areas of value enhancement.
Some benefits of a Financial Audit:
- The audit will look at your internal controls
- Improve substance of the financial statements
- Add value to your company from a valuation perspective
- Peace of mind
There have been enduring series of disclosures of fraudulent reporting by major companies; due to this factor audits have become progressively common as the density of the two primary accounting frameworks, Generally Accepted Accounting Principles and International Financial Reporting Standards have amplified. You should consider completing a financial audit on an annual basis.
The main stages of an audit are:
- Planning and risk assessment
- Internal controls testing
- Substantive procedures (includes a collection of procedures)
- Accounts receivable
- Fixed assets
- Accounts payable
- Accrued expenses
Audits are more expensive for publicly-held firms because auditors must adhere to strict audit standards set forth by the Public Company Accounting Oversight Board (PCAOB). The least expensive audit is a Compilation, followed by a Review. Due to its cost, many companies attempt to downgrade to a review or compilation. Though this is only an option if it is acceptable to the report recipients.
A compilation engagement may address either a complete set of financial statements or an individual statement. The company takes responsibility for the preparation and presentation of the financial statements.
This documentation includes the engagement letter, issues and any communications to management regarding fraud or illegal acts noted by the accountant. This report states that the accountant has not audited or reviewed the financial statements, and therefore does not express an opinion or provide any assurance that the financial statements are in accordance with a financial reporting framework.
If the accountant believes that the financial statements being compiled may be materially misstated, he should obtain additional information to confirm or deny this impression. If he is unable to obtain such information, the accountant should withdraw from the engagement.
The company takes responsibility for the preparation and presentation of the financial statements.
The accountant performs procedures necessary to provide a practical foundation for attaining limited reassurance that no substantial changes are needed to bring the financial statements into compliance with the appropriate financial reporting agenda.
The types of procedures that would be reasonable to conduct for a review include:
- Read the financial statements to see if they seem to follow with the related financial reporting framework
- Review the management reports of any accountants who reviewed or audited the entity’s financial statements in prior periods
- Follow up on questions that were of concern during previous reviews
- Inquire about the procedures for recording accounting transactions
- Investigate findings that appear to be inconsistent
- Investigate significant transactions occurring near the end of the accounting period
If the statements are significantly misstated, the accountant can choose between, disclosing the issue in the report or withdrawing from the review.