Financial Statements

“I need a loan and my bank is requiring financial statements.”

“I need help preparing my company’s financial statements.  I am not an accountant and sometimes I don’t know what I am looking at.”

There are many reasons managers might need financial statements prepared by an accountant.  In addition to the requirements of lending institutions, many managers need additional assurance that the financial information they use is accurate.

The Certified Public Accountants at Wilging, Roush & Parsons are recognized in the community for providing users with quality financial statements which are used as a basis for decision making.  When required, we strive to make financial statement disclosures easy to understand, as well as complete and accurate.

We aim to do more than just provide our clients with a set of financial statements.  From the sophisticated accountant, to the entry-level bookkeeper, we work with our clients at the necessary level to ensure they understand the financial statements and the underlying documentation.  We believe this is a critical step because it allows our clients to take ownership and responsibility for the financial information and to use the statements as a tool for decision making.

Having quality financial statements is also the first step in forming business strategies.  It is difficult to plan for the future without historical information.  Benchmarking, forecasting, and cash flow models all depend upon having historical financial statements.

Levels of Financial Statement Assurance

Compilations

Objective of a Compilation Engagement

The objective of a compilation engagement is to present in the form of financial statements, information that is the representation of management (owners) without undertaking to express any assurance on the financial statements.

Limitations of a Compilation Engagement

A compilation differs significantly from a review or an audit of financial statements.  A compilation does not contemplate performing inquiry, analytical procedures, or other procedures performed in a review.  Additionally, a compilation does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; tests of accounting records by obtaining sufficient appropriate audit evidence through inspection, observation, confirmation, or the examination of source documents (for example, cancelled checks or bank images); or other procedures ordinarily performed in an audit.  Therefore, a compilation does not provide a basis for expressing any level of assurance on the financial statements being compiled.

Reviews

Objective of a Review Engagement

The objective of a review engagement is to express limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with GAAP.

Review Performance Requirements

In order to obtain a reasonable basis for the expression of limited assurance, the accountant must: apply analytical procedures to the financial statements, make inquiries of management and other company personnel (when deemed appropriate), and obtain representations from management for all financial statements and periods covered by the accountant’s review report.

Limitations of a Review Engagement

A review differs significantly from an audit of financial statements in which the auditor provides reasonable assurance that the financial statements, taken as a whole, are free of material misstatement.  A review does not contemplate obtaining an understanding of the entity’s internal control; assessing fraud risk; tests of accounting records by obtaining sufficient appropriate audit evidence through inspection; observation, confirmation, or the examination of source documents (for example, cancelled checks or bank images); or other procedures ordinarily performed in an audit.  Accordingly, a review does not provide assurance that the accountant will become aware of all significant matters that would be closed in an audit.  Therefore, a review provides only limited assurance that there are no material modifications that should be made to the financial statements in order for the statements to be in conformity with GAAP.