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The which standards the financial statements have

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The purpose of financial statement audit is to determine the fairness of an entity’s
financial statements according to the GAAP(Generally Accepted Accounting
Principles), by an independent auditor. Fairness
here can be broken down as the financials being
presented are correct and in the proper formats/methods.

A
Financial
statement audit report simply is
the document through which the auditor or the accounting audit service presents
their findings in a standardized manner.

Why Do You Need Financial Audits?

Financial
statement audits are needed to assure
various stakeholders such as financial institutions, management, and the tax authorities that the financial
statements are prepared correctly and
that there is no misreporting.

Auditing
accounting statements can also help present a
clearer picture to the suppliers about the company’s ability to pay
them. Banks and other financial institutions can use it to establish creditworthiness and the potential for investment.

Elements of the Financial Statement Accounting Audit Report

Report Title

The
title of the report should contain the date of the report. This is usually the last date of the fieldwork. It should
also mention the addressee of the report, who
is usually the shareholders or the board
of directors.

Mentioning
“Independent” in the title helps distinguish it from internal audits.

Opening or Introductory Paragraph

This
paragraph is to inform that an audit has taken place, it mentions the financial
statements that have been audited, mentioning the relevant period for which the audit is
taking place.

This
paragraph also emphasizes that the responsibility of the financial statements
lies with the entity’s management entirely and that the auditor’s
responsibility is to review the statements
presented and provide an opinion on the basis of
said audit.

Scope Paragraph

The
scope paragraph mentions that the audit has taken place according to the generally accepted accounting practices for the
country according to which standards the financial statements have been prepared.

It
also states that the audit was done to provide reasonable assurance that the
financial statements were free of misstatement
since a guaranteed assurance is difficult
due to certain limitations of the audit.

It
also needs to state that the auditors assessed the accounting principles used
and the significant estimates made by the entity’s management while preparing
the financial statements.

Opinion Paragraph

The
opinion paragraph specifies the financial reporting framework as per which the
financial statements have been prepared
and whether they have been made compliant with
that framework. Whether it is
International accounting standards or those of a specific country, the framework is
mentioned clearly.

The
terminology generally used is that the financial statements “give a true and fair
view of ” or “are prepared in accordance with the
framework {GAAP} for instance.

For
Eg. Accounting firms here in Mississauga or Canada, in general, would mention either IFRS or
ASPE depending on whether the company is listed or not, as these are the GAAP
in Canada.

Date of Report

The report prepared by the auditor should be dated as of the completion date
of the audit. This signifies that the
auditor has taken into consideration any events that could impact financial
statements up to that date.

The
report should not be dated before the
approval date of the financial statements by the management.

Auditor’s Name & address

 The auditor needs to print his name at the end
of the audit and. There should be a mention of the accounting firm he works for
as well, along with the location /address of the firm.

For
Ex.

Mr. ABC

 XYZ Accounting Audit Firm GTA

Auditor’s Signature

The
report must be signed off by the auditor and/or
in the name auditing accounting firm the
auditor represents as the responsibility
will eventually lie with the firm.

These
are the general components of a financial statement audit report.
There might be some differences, and some
things might need to be mentioned as per
the specific country or location’s legislation.

Takeaway

Financial
statements are key indicators of a
company’s health and are equally important
for meeting respective compliance norms anywhere in the world. Choosing the
right accounting audit service providers therefore is a critical decision and should be
made after careful deliberation.