FINANCIAL STATEMENT AUDIT
FINANCIAL STATEMENT AUDITS
A financial statement audit is the highest level of assurance a privately held company or nonprofit entity can obtain about the condition of the organization’s financials. An annual audit is often required by the terms of loan covenants and agreements with vendors or to satisfy regulatory requirements. The purpose of an audit is to determine whether the financial statements are properly presented and accurately represent the financial condition of the entity. An independent auditor will test the application of accounting principles for accuracy, validate data through independent verification, and conduct other steps as required by established auditing standards. It is important to note these audits can only be performed by an independent Certified Public Accounting (CPA) firm.
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Financial Statement Audit Process
- Risk Assessment – During this phase, the audit team will spend time becoming familiar with the business or nonprofit entity, its operating structure, and industry-specific nuances. This allows the auditor to understand the areas with the greatest risk for misstatement specific to that organization. Concurrently, time is spent examining the internal control structure to understand how assets are safeguarded and duties are segregated.
- Engagement Strategy – During this phase, the audit team develops a broad strategy and detailed plan outlining how key risk areas will be examined. This includes decisions on whether to rely on internal controls and the most useful testing procedures. At the conclusion, an audit plan is formalized, engagement timetable outlined, and audit tasks assigned.
- Audit Fieldwork – During this time, the audit team is actively involved in testing various procedures to collect independent audit evidence. As the name implies, auditors will often be on site conducting inventory counts, interviewing employees, testing internal controls, and examining areas like accounts payables and receivables. It is becoming more commonplace for fieldwork to be conducted remotely.
- Audit Report – Once the fieldwork is complete, the audit team will then review the findings and start drafting the financial statements, including footnote disclosures. Most importantly, the auditor’s opinion will be included, which essentially certifies the financial statements. While there are four types of opinions, the best is an unmodified opinion because it confirms the financial information is fairly presented and free from misstatement.
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Audit Experience
While many audits are technical and follow a rigid process, that does not mean the search for an audit firm needs to be. Our firm has years of experience conducting audits for privately held businesses and nonprofit organizations in New Jersey and Pennsylvania.
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Let Us Help You Move Forward
If you are looking for assistance with your first audit, or are simply seeking a more service-focused auditor, Klatzkin can help. For additional information complete the form below and a team member will follow up with you shortly.
