If you aren’t well-versed in accounting, the word “audit” can sound pretty scary! Financial statements can be audited, but they aren’t always. What is an audit of a financial statement and why would you need one?
What is an audited financial statement?
An audit means that someone who knows what they’re doing has looked at the details of your financial statements and said they look correct. That person should be a CPA. They should have the legal ability to certify and audit.
They perform the audit so that you and whoever you are dealing with know for certain what is in your books. You would really only need an audit if you need someone to sign off on your books.
For example, a banker may have to have a CPA confirm that your financial information is accurate and true. You may be asking for an enormous loan or otherwise putting the bank at risk and they need an extra layer of assurance. Having audited books means you have to pay a certified accountant their fee, however high or low, to get that taken care of. It can be very expensive! But it also provides you with some legal protection, so it can be very beneficial for you, not just the bank.
Can bookkeepers audit financial statements?
As bookkeepers, we don’t issue audited financial statements. Yes, we make absolutely sure they are accurate and reconciled. But our services are referred to as management financial statements.
We talk through the books with clients so they know if the numbers match what they see happening in their business. We also make sure that their books are taken to a level where an auditor could look at them and say, “Yes, these are ready for me to sign off.”
Management financial statements vs. audited financial statements
Management financial statements are meant for internal use, for managing your business. An auditor could look at them and say they are right and accurate without having to prepare the books themselves.
Audited financial statements, on the other hand, are meant for something big. Usually you have them prepared because the bank is specifically requesting audited financial statements. If you are asked for an audit, we can absolutely help you figure out the best option.
We really haven’t run into a situation yet where audited financial statements were required. A bank usually only asks for them in dicey or daunting financial situations or where the legal circumstances are higher stakes. Most of the time, your banker will simply want to be sure your numbers are right and were reconciled by a professional.