Presenting Annual Audited Financial Statements
Audited Financial Statements vs Management Accounting Records
There are few things that you should know about the preparation of Annual Audited Financial Statements, or Audit.
The first, is that an Audit is performed by an independent audit firm, i.e. someone outside of the organisation.
An Audit is, therefore, different from the monthly account statements that your Accounting Officer or bookkeeper (often an internal person) will/should be producing, and which keeps track of all daily transactions against the organisation’s funds. These monthly accounting records, are often referred to as Management Accounts because they provide the management of the organisation with a regular update for the organisation’s finances. It is important that this information is kept up-to-date, as it is used to inform important management decisions on what is available to cover the organisation’s monthly operating expenses.
An Audit, involves performing certain procedures to obtain audit evidence about the amounts and disclosures that are made in the organisation’s official financial statements. It is important to understand that the specific procedures selected, will depend on the auditor’s judgement, which includes his/her assessment of the risks of any material mis-statement in the financial statement, whether due to error or fraud. In making those risk assessments, the auditor considers internal controls relevant to the preparation and presentation of the financial statements, and will design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal controls.
An audit also includes evaluating the appropriateness of accounting policies used in the organisation as well as the reasonableness of any accounting estimates made by the trustees/directors of the organisation.
In summary, an Auditor provides an independent judgement on the validity, accuracy or completeness of the information contained within the Annual Financial Statements.