Financial Statements – Key Aspects that Matters
Are you sensing the requirement of preparing financial statements of your business and want professionals to do the task for you? A Company is obliged to prepare financial statement whenever its stakeholders, creditors and potential investors request to do so. A financial statement is a report that highlights all the financial activities and position of a business or individual.
If you are looking for professionals who can prepare the financial statement for your company, then you should learn about the differences between their services and engagements. The article will highlight the key factors and differentiate their services and engagements.
Notice To Reader/Compilation Engagement
If you have hired chartered professional accountant (CPA) to prepare the financial statement for your company, then they will prepare a report called a “Notice to Reader” that will notify that the financial statements prepared by them are unaudited, and there is no guaranteed that the details of the amount provided by your company are free from considerably misstatements.
In this type of engagement, the accountants prepare financial statements by information provided by their clients or any other concerned person. This means the chartered accountants will not be responsible for any misinformation recorded on the financial statement.
This engagement is applicable when the stakeholders, creditors like bank or investors request the company to ensure that amounts described within the financial statements are reasonable. Unlike a Notice to Reader, where accountants do not give any assurance on the genuineness of the described amount, in the review engagement, it gives a low level of assurance on the genuineness on the described amount.
In this process, the accountants discuss the matter with the client and perform some analytical procedures. They perform such procedures to ensure that the information given and recorded in the statement is plausible. This engagement type is also known as negative assurance because the level of assurance remains low here.
This engagement comes after the review engagement,andprocures performed during the review engagement prepares it. After performing the discussion and analytical procedures, accountants go for a process called substantive procedure. In the substantive procedure, chartered accountants go for an in-depth examination of information and materials that defend the amount described in the financial statements.
In this procedure, the accountant should examine and understand the financial condition and internet controls of the company they are hired. After performing a thorough examination, hired accountants evaluate the information and find the significant deficiency if any. Once the engagement is complete, the chartered accounts or auditors will submit an audit report.
Here, the level of assurance is much higher than other types of engagements. In this engagement, the financial statement prepared by CPA, are free of material misstatement. An audit report is also a part this engagement that highlights the details of the company’s internal controls along with other significant findings.
Benefits of the Financial Statement Analysis
For some business owners, the task of preparing a financial statement is a complex and time-consuming process,and that is why they outsource the task to the professional accountants. The financial statement says a lot of things about a company including its financial conditions.
In general, company prepare financial statements once in a year,but such statements can be furnished on the monthly or quarterly basis on the request of stakeholders, creditors or investors. The financial statement can highlight your total current assets. Such a report can help you to ensure your financial capabilities to handle upcoming challenges. They determine profit margins, track inventory, calculate debt to equity and many other things.
These are some of the important aspects of financial statement you should know before hiring a professional accountant to get your job done. Thus, know the differences between the services and ask your accountant to work on the best accounting practice that can provide you with an error-free report on the financial condition of your business.
Speak to an adviser
As you can see, there are many factors to consider in selecting the appropriate level of assurance. We with be happy to speak with you about the right choice for your company.