A company’s financial statements are quantified reports of its performance for a specific period, usually a year, but can sometimes be quarterly as well. Financial statements typically include an income statement, balance sheet, as well as cash flow. These things record the stream of cash in and out of the company’s coffers for analysis purposes later on. Ultimately, the numbers in these statements serve to tell investors, authorities, and the company itself whether they are growing or losing in the business.
Difference Between Audited & Unaudited Financial Statements?
Financial statements can either be audited or unaudited. Auditing is a process conducted by a third-party auditor who examines submitted financial data for accuracy. Audited financial statements are required for companies available for public ownership, acting as a way for investors and the general public to assess a business entity as worthy of investment or not. Naturally, companies with substantial income and steady cash-flow for their industry are favourable to potential investors.
Companies who comply with audit requirements of the state also enjoy good standing before its home or host country’s regulatory body. In Singapore’s case, the body in charge of this is the Accounting and Corporate Regulatory Authority or ACRA.
When Are Unaudited Financial Statements Used?
Generally, Unaudited Financial Statements are used internally by companies so as to save on auditors’ professional fees. These financial statements are also regarded as being less accurate than audited ones. One must note, however, that unaudited reports do contain the same set of data, which includes income, cash flow, and balance sheet. Such report is also prepared by a duly appointed company accountant. The process usually stops there though, without the need for an auditor to counter-check.
If audited financial reports are used for maximum transparency, unaudited reports are used for maximum cost-efficiency within a business entity. Companies are highly recommended to hire the services of well-established auditing companies to ensure high standards of accuracy every time.