In order to complete a transaction involving a company’s finances, it is common for financial statements to be examined and authorized by a third party. A company’s financial records may be audited by a certified public accountant (CPA), a neutral third party. There are three sorts of assurance services: audits, reviews, and compilations. Accountants give two types of assurance: auditing, which is the most complex, and financial statement creation, which is the most basic. In order to get an overview of an organization’s financial health, business leaders might use prepared financial statements as a starting point. In addition, they are critical for preparing tax forms and assessing financial results. For Compilation of Financial Statement here are the things you must do.
Obtain proof of account balances and transactions, such as official documentation
A company’s financial statements cannot be considered accurate without supporting paperwork. If a firm does not create its own balance sheet and income statement, bank statements and invoices are used to produce the financial statements. Investment statements, loan balances, a list of revenues and expenditures, and a comprehensive transaction record of all financial statement accounts are all examples of the documentation that must be submitted. A year’s worth of company transactions are recorded in the general ledger, a document sometimes known as the entire transaction listing.
Look for any apparent errors in the financial data and correct them
Tennessee’s Society of Certified Public Accountants has said that compilation standards do not require accountants to verify or confirm the financial statements provided by their clients (TSCPA). Due to the simplicity of compilations as a financial statement service, it is unnecessary for accountants to examine the balances of lenders, investors, or suppliers of the firm. However, it is the accountant’s responsibility to analyze documentation and financial accounts for obvious errors and raise questions with management if any severe challenges arise during a compilation task.
When analyzing financial data, any mistakes that are detected should be corrected in the journal
An accountant may need to make an adjusting journal entry to correct an apparent mistake in a company’s financial statements and verify that the financial statement values are supported by the presented data. Accounting standards generally accepted in the United States of America guide the preparation of compiled financial statements (GAAP). It is possible, however, for a company to report its financial data using a more complete accounting framework, such as the income tax foundation of accounting. The recommended adjusting journal entries are based on the company’s accounting procedures.
Draft financial statements and notes
Compiling financial statements, an accountant provides an audit report to management, noting that the financial statements have not been audited or examined by the accountant, and that no opinion or other assurance has been issued on the financial statements in question. Financial statements are also accompanied with notes that explain the accounting principles used in the production of the financial statements if necessary. Compilation notes are often drafted by accountants, although an organization might choose not to include them in its financial statement presentation. Once management has determined that financial statements will not be used by anyone else, the accountant’s report is updated to reflect that all disclosures have been removed from the financial statements, which is the case in most companies.