Audited Financial Statements are the highest level of assurance service offered by a CPA and are used in specific situations, usually for larger clients.
Due to this service offering the highest level of assurance, it is also the service with the highest cost and time of completion. The reasons for an audit are usually at the request or requirement of a lender, granting government or stockholders. The size and volume of business a company transacts may also be so large that an audit makes sense.
What is an Audit?
An Audit is a service offered by a CPA in which the accountant looks to provide the highest level of assurance that the clients financial statements represent fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with the generally accepted accounting principles or other applicable framework.
This involves the CPA gaining knowledge and understanding of a client’s organization and its environment, including their internal control. Assessing material misstatement risks and designing audit procedures to respond to those assessed risks. A CPA will then carry out these procedures to gain evidence which is the basis for the CPA to provide an opinion on the soundness of the client’s financial statements as a whole.
CPAs often perform several tests of specific higher risk areas of a company’s financials in an audit. They will usually look at material cash accounts, outstanding receivables and income accounts by doing various procedures to provide their balances are accurate and not materially misstated. An audit often includes recalculations of material amounts calculated by the client or perhaps testing to verify a client’s system for recording accounting transactions works correctly. Each client offers different areas of risk and therefore will have a specific audit plan setup for them to reach the goal of providing an opinion on the financial statements.
Audits are the most in-depth and lengthy services provided and consequently the most pricey. Many times an audit is over the level of service a client really needs for its situation and a Review or Compilation will suffice while saving the client time, fees, and headaches.
At BHT&D CPAs, we are committed to giving each client personal attention and spending the time needed to completely understand your circumstances. Please contact our office to meet with a professional and discuss your specific situations. Request a complimentary accounting consultation or contact us at (616) 642-9467.