All entities large or small must prepare some kind of financial report on the financial performance of their companies. These reports ultimately help entities prepare tax returns, facilitate owners/managers make key financial & investment decisions, enable banks and lending institutions evaluate loans, and help meet certain mandatory requirements of government entities providing grants and other forms of assistance to companies.
There are multiple ways in which a company generates financial statements. Each of these have their independent audience.
Internally-Prepared Financial Statements
Internally prepared financial statements or management statements, are financial statements prepared in-house by a company and have not been reviewed or validated by a Certified Public Accountant (CPA). Given that no independent person of authority (i.e., Certified Public Accountant) attests to the "quality" of the financial statements, investors, creditors, bankers have little way of knowing what methods were used to prepare them or how fair or accurate they are.
Compiled Financial Statements
These are financial statements that have been created by an accountant or accounting firm from internally-prepared client statements. Compiled statements don't carry any warranty or pledge of any kind by the accountant or accounting firm as to accuracy or whether or not the books were maintained or developed in conformity with GAAP. The CPA is required to understand the accounting principles and practices of the industry, understand the client's accounting system and read the financial statements for obvious errors. It is much less in scope than a review or an audit. Thus, a compilation is much less expensive and takes less time.
Reviewed Financial Statements
As the name implies, reviewed statements have been reviewed by an accountant or accounting firm. A financial statement review is a service under which the accountant obtains limited assurance that there are no material modifications that need to be made to an entity's financial statements for them to be in conformity with the applicable financial reporting framework. The extent of the review is limited, and provides a limited form of assurance on the company's financial statement. A financial statement review is more expensive than a compilation and less expensive than an audit. It is preferred by businesses whose lenders and creditors allow them to use this approach, thereby saving the cost of a full audit.
Audited Financial Statements
An audit is a sophisticated independent evaluation of an entity's financial statements. An audit provides the highest form of assurance with an opinion from the CPA that the financial statements are true and fair and in conformity with GAAP (Generally Accepted Accounting Principles). Audited statements have undergone in-depth review and testing by a qualified third party. An audit is a complex investigation and analysis of your financial records, including the general operating practices of your business.
Unlike large or medium-sized entities, challenges facing small businesses are rather unique. At Krishnan Company, we are well aware of small business issues and therefore in a compilation, review or an audit, our objective is not just to issue an opinion, rather to provide creative suggestions to management that helps improve their accounting processes and control procedures.
|Our assurance practice provides assistance in the areas of|
|Financial Statement Audits (for RFPS, external borrowings)|
|Compliance Audits (eg: Student Financial Aid audit for the Dept. of Education)|
|Internal Control Audit (SAS 70 audits)|
|Financial Statement Reviews|
|Financial Statement Compilations|