Financial Reporting is the process of creating financial statements showing the results of operations for your business, including balance sheets, income statements, equity reports, cash flow reports and notes to these statements.
Financial statements provide useful information to banks and other lending institutions as well as owners and investors making investment, credit, and other business decisions about the progress and expansion of your company.
APA will consult with your internal staff to develop the processes and systems to be used to meet your internal and external financial reporting requirements. Our professional staff is well versed in GAAP (Generally Accepted Accounting Principles). When consistently applied, financial statements prepared using GAAP are readily accepted by banks and other lending institutions.
The scope and cost of any financial reporting engagement is determined directly by the level of reliance required by either internal management or by outside companies such as your bank. Financial reporting engagements are classified as either a Compilation, a Review or an Audit.
Compiled financial statements represent the most basic level of service accountants provide with respect to financial reporting and are often prepared for privately-held entities that do not need a higher level of assurance expressed by an accountant. In a compilation, the accountant must comply with certain basic requirements of professional standards:
- Knowledge of the client's industry and applicable accounting principles
- Provide a clear understanding for the client as to the services to be provided
- Dissecting the financial statements to determine whether there are any obvious departures from generally accepted accounting principles (or, in some cases, another comprehensive basis of accounting used by the entity).
It may be necessary for the Accountant to perform "other accounting services" - such as creating your general ledger, or assisting you with adjusting entries for your books - before the financial statements can be prepared. Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles. This is known as the expression of no assurance.
Reviewed statements require that an accountant perform inquiry and analytical procedures in addition to the procedures described above for a compilation. Upon completion, a report is issued stating that a review has been performed in accordance with professional standards, that a review is less in scope than an audit, and that an accountant did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles, or if applicable, another comprehensive basis of accounting. This is known as the expression of limited assurance Reviewed financial statements are often prepared for entities that have bank loans, outside investors, or trade creditors, but those third parties do not require audited statements.