How to do Audit of Financial Statements Under US GAAP?
Financial auditing is the overview on the financial statement by an independent auditor to prove its credibility under generally accepted accounting principle (GAAP). Therefore, it is a major check which needs proper attention. How to audit for financial statement is simple with few steps to it.
It is good to know that the audit in this regard has to be free from wrong statement or false facts. It is supposed to show neutrality and be the fact at the same time.
Things to do for Audit of Financial Statements:
Get necessary documents:
The first and most important thing is the financial statement which must have been compiled based on the business transaction of the firm or organization. The balance sheet showing the debits and credits with the statement of operation are considered. The consideration helps in making the auditor’s report. The report must not be with errors or linked with traces of fraud.
Make your report:
After you have carefully examined necessary documents from a neutral and professional point of view, you make statements that show the state of the business and the possible outcome based on the documents you went through. This statements is expected to be in professional terms and understandable; this would also help you when making a presentation. It should not be just on the eventual balance as it is in cash basis but in accrual basis and value in US dollars.
The requirements of the GAAP includes that you provide important information, that is, information:
- Useful for making (long-term) decisions, financial decisions.
- Presentable before potential investors and creditors (in terms of references and decision).
- An actual record keeping and maintaining (becoming part of the firm’s records)
- Useful in business improvement
- Useful in the presentation of amounts, timing and uncertainties about economic resources, certain claims and the changes in the claims to prospective investors and creditors.
Other things to know
- The idea of legal personality is still recognized. The theory of legal personality sees a business in isolation (an entity) and different from the owners or even affiliated businesses, it should be regarded as such.
- A business is assumed to have perpetuity of life. Perpetuity of life simply means that continual existence is expected of all kinds of business, most especially, when liquidation is not imminent.
- Though some information might seem highly sensitive, it should not hinder the report. The information available should be sufficient enough to help investors in decision making.
- The acquisition cost of assets and liabilities should be accounted for. The report should not be just the beautiful sides.
- When choosing between two solutions, convention of conservatism encourages that the solution with the less favorable outcome should be chosen.
The audit is for the purpose of generating reliable statements and predictions but there is always the fair bracket so in releasing the financial report, the three types of statement should be considered. The three types of statements are the unqualified opinion, the adverse audit report and the qualified opinion. These ensure a proper audit financial statement in accordance to the generally accepted accounting principles.
The companies in Maryland are a good choice for Audit of Financial Statements under US GAAP.