Steps for Analysis of Audited Financial Statements?
- Audited Financial Statements are the output of a completed Audit.
- They will include standard Financial statements, narrative reports written by officers of the company, the Auditor’s report, and specific notes completed for statutory purposes. Analysis of Financial statements starts from these reports.
- Analysis of Audited Financial Statements are used for many purposes. These are used by lenders, investors, suppliers, the government, etc. For example, a mortgage provider assesses a company’s financial well-being. For companies of a grander scale, lenders and investors in such businesses will often use the Financial Statements to compare them with companies of a similar several and within the same industry. Suppliers to trade can use the Statements too in a process to assess if the business is a reasonable credit risk
Process for Analysis of Audited Financial Statements
Let us discuss how analysis of financial statements works and signifies
Analysis of Financial Statements with Director’s Report
This report outlines how the company manages different aspects of risk applicable to the company’s activities. They will also provide some background to the company’s business, comments on significant metrics used to measure the business performance, and how the Directors see the present and future outlook for the company. This document is not auditable per se; however, the Auditor is required to ensure that such statements are consistent with other Audited information contained in the Audited Financial Statements
Analysis of Financial Statements with Independent Auditor Report
Auditors Report this will be in a standard form if Audit has gone smoothly, with the Auditors formally signing off on several facts and opinion whether necessary access to the books and records of the business given or accounting treatments were appropriate, whether the company considered a ‘going concern’ (can pay their debts as they fall due) and others
Analysis of Financial Statements with Income Statement and Balance Sheet
These are more commonly known as P&L and Balance Sheet. These are prepared in a specific format, which includes comparative figures for the previous audited period.
Analysis of Financial Statements with Notes to the Annual Accounts
Some of the key figures on the Balance Sheet are provided in the notes. Examples include;
- Schedules showing new Fixed Asset purchases and disposals in the period Audited,
- Details of creditors, which show how much money is owed to trade creditors, for tax liabilities, and to lending organizations and
- a statement of movements in equity during the year, including new Equity monies raised.