Audited financial statements refer to the comprehensive set of financial records, statements, and reports that have undergone a rigorous examination by an independent certified public accountant (CPA) or an external auditor. This evaluation is conducted to ensure the accuracy, reliability, and compliance of the financial information presented by an organization.
The audit process is typically carried out annually and encompasses an in-depth review of an entity's financial transactions, accounting practices, internal controls, and financial statements such as the balance sheet, income statement, statement of cash flows, and statement of retained earnings. The purpose of auditing financial statements is to provide stakeholders, including investors, lenders, shareholders, and regulatory bodies, with reasonable assurance regarding the fairness and transparency of an organization's financial performance and position.
The auditors follow generally accepted auditing standards (GAAS) and the applicable financial reporting framework, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), to assess the accuracy and completeness of the financial statements. They meticulously examine the underlying records, supporting documents, and management representations to detect any material misstatements, errors, or fraudulent activities.
Once the audit is completed, the CPA or external auditor issues an audit opinion, which indicates their professional judgment regarding the overall fairness and compliance of the financial statements. A favorable audit opinion enhances the credibility and reliability of an organization's financial information, thus instilling confidence in the users of such statements.
