As part of the financial accountability that most entities provide to investors, board members, and constituents, the use of audited financial statements are common. Essentially, these statements are simply the accounting documents that are prepared by a certified public accountant (CPA) on behalf of a business or non-profit organization.
The source documents for the audited financial statements are usually provided by the organization wishing to have an auditor prepare a financial statement. This will often include a wide range of documents, such as accounts payable and receivable information, expense reports, budgets, and any other type of financial record that the organization has in its possession. The accountant will take these various financial statements, evaluate and cross-reference them, and provide a professionally prepared statement that the organization can then present to interested parties.
Audited financial statements usually include a document that is referred to as an opinion. It is the responsibility of the accountant to provide either an unqualified opinion or a qualified opinion. An unqualified opinion basically states that in reviewing the documents submitted by the organization, the accountant is in agreement with the methods used to prepare those documents. In effect, the accountant is stating that the audit is accurate and complete.
By rendering a qualified opinion, the accountant indicates that he or she is not in agreement with the methods used to prepare the supporting financial documents. This does not necessarily mean that the accountant thinks something unethical is happening. It could, however, mean that the accountant found instances where expenses should have been assigned to a different category, or there was some errors found in line items, such as transposed digits.
Once in a great while, an accountant does not feel free to render an opinion. This may mean that the records supplied were insufficient to prepare proper statements, or that there were a number of issues that would have to be addressed before the accountant would be able to evaluate the accuracy of the information provided. Generally, when an accountant declines to issue an opinion, the organization needs to retool its internal accounting procedures so that it can operate according to the usual and proper accounting standards.
Audited financial statements are often prepared on an annual basis, and are presented to persons or groups who have an ongoing interest in the organization. Businesses typically make them available to investors, upper level management, and the board of directors. Non profit organizations may choose to share the statements with members, the operating staff, key departmental managers, and other the members of whatever governing body exists within the organization.