Financial Audits
Many people do not understand the difference in the level of assurance
that banks or others require. There are basically 3 different levels of
financial statements that can be professionally presented, but only two
levels give the assurance that the numbers on the paper have been verified.
The 3 levels of Financial statements are:
- Audited Financial Statements
- Reviewed Financial Statements
- Compiled Financial Statements
The 2 levels of Financial Statements that show a bank or state that the numbers on the paper have been verified by a professional who has the expertise to know what he/she is looking at are:
- Audited Financial Statements
- Reviewed Financial Statements
In an audit, Kantor Geisler and Associates, LLC follows rules set up by
the American Institute of Certified Public Accountants that have been
refined for hundreds of years to make sure that every number on the
financial statement has been looked over, sampled for evidence of where the
number came from and that it is presented on the financial statement in a
way that is accepted exactly the same way in the entire United States.
In a standard audit, we painstakingly take the time to understand the client
and what they do at a very deep level, from owner to employee. We want to
know if the owner runs a tight ship or sloppy operation as far as internal
controls. We set up procedures and budgets approved by the AICPA mentioned
above, then we send out confirmations to banks, lawyers and even some
purchasers of the clients products. Only then do we go into the
client's office and follow the documentation of many sample transactions
from the beginning, such as when the sales invoice was created, to the end
of the transaction, which is delivery of the product. We make sure that the
money from the sale came into the company's bank account on each transaction
by examining the bank statements, whether the revenue was in the form of
cash, checks, credit cards or deferred into accounts receivable or
installment payments. We verify that the product sold in that
transaction was purchased and inventoried properly. We physically count the
inventory ourselves and verify that it is still current inventory, (not
out-of-date items that should not be valued on the financial statement). We
look at documents that prove that costs are recorded correctly for every
aspect of the company, including delivery and/or shipping on that sample
transaction. We even want to know that customers were satisfied with what
they bought. We confirm to the bank or whomever is requiring the audit that
the information is true and not made up or that the financial statement has
expenses on it that should not be there. The actual procedures are much more
intense than described here, but this gives a general idea of what an audit
would do compared with the Review or Compilation explained on the next page
of our site.
Reviews
Reviewed Financial Statements
Reviewed Financial Statements give a slightly lower assurance to a bank or
state or whomever is requiring you to have verified information for a loan
or to keep a license with the State or Federal Government.
In a review, we are not required to go out to a client's office and look at
original documentation or samples of documentation to verify that the
numbers are correct and true on a client prepared financial statement. What
is required, and the banks know it, is to get an understanding of the
business we are issuing a review on and perform analytical procedures on
those numbers. What analytical procedures mean is,
Also required in a review is to present notes to the financial statements,
which explain where revenues come from, how expenses are presented, what
loans a company has and how long they will be on the books for and what
interest rates they are at.
Many other aspects of a reviewed financial statement are.