Understanding a financial statement audit (2024)

FAQs

How do you analyze audited financial statements? ›

The primary financial statements of for-profit businesses include the balance sheet, income statement, statement of cash flow, and statement of changes in equity. Nonprofit entities use a similar set of financial statements, though they have different names and communicate slightly different information.

What are the five methods of financial statement analysis? There are five commonplace approaches to financial statement analysis: horizontal analysis, vertical analysis, ratio analysis, trend analysis and cost-volume profit analysis. Each technique allows the building of a more detailed and nuanced financial profile.

Assets are on the top of a balance sheet, and below them are the company's liabilities, and below that is shareholders' equity. A balance sheet is also always in balance, where the value of the assets equals the combined value of the liabilities and shareholders' equity.

A financial audit checklist is a document that contains list of tasks that must be completed during the financial auditing process, which is typically conducted once a year. A financial audit checklist helps you: Examine your company's income and expenses.

There are three phases to an audit: the planning phase, testing internal controls and substantive testing. Auditors check the accounting data using substantive testing, within the context of materiality and risk assessed during the planning phase, as well as the overall effectiveness of the control environment.

From understanding the preliminary steps, through the necessary interviews and information gathering stages, to actually writing the audit report that uses the 3 c's (context, clarity, customization, you will be given a formula to follow that delivers predictable and valuable results.

What are the 4 C's of auditing? ›

As for directors, there are four features to consider when evaluating the sufficiency of any risk-based audit plan: culture, competitiveness, compliance and cybersecurity – let's call them the Four C's, for short.

The procedure calls for an examination of the books, records, documents, and minutes (scanning the latter as far back as they are likely to bear on the financial condition in question) together with oral inquiry addressed to certain officers and employes of the organization, for the pur- pose of verifying the value, ...

Gathering evidence—Auditors apply professional scepticism and judgement when gathering and evaluating evidence through a combination of testing the company's internal controls, tracing the amounts and disclosures included in the financial statements to the company's supporting books and records, and obtaining external ...

Have the company's relationships been properly disclosed? - Have there been any disagreements between management and the independent auditors on accounting principles or how to account for a significant transaction? How were they resolved? What were the issues for which the auditor consulted with its national office?