Thus, a note or supplementary schedule, no matter how skillfully drafted, does not compensate for the erroneous presentation of an item in the financial statements.Ĭomparative financial statements A complete set of financial statements for one or more prior periods included for comparison with the financial statements of the current period. In evaluating financial reporting disclosures, the auditors should keep in mind that disclosures are meant to supplement the information on the face of the financial statements-not correct improper financial statement presentation. Examples of these requirements include the disclosure of significant accounting policies, accounting changes, loss contingencies, and lease and post-retirement benefit information. The Financial Accounting Standards Board (FASB), the Government Accounting Standards Board (GASB), the Federal Accounting Standards Advisory Board (FASAB), and the Securities and Exchange Commission (SEC) have issued numerous pronouncements that have added extensive disclosure requirements. Adequate disclosure in the notes to the financial statements is necessary for the auditors to issue an unmodified opinion on the financial statements. The purpose of notes to financial statements is to properly disclose information required by generally accepted accounting principles that cannot be adequately conveyed on the face of the financial statements. referred to as accounting principles generally accepted in the United States of America. In the United States, these financial statements are most frequently prepared following the general-purpose framework A financial reporting framework designed to meet the common financial information needs of a wide range of users (e.g., GAAP, International Financial Reporting Standards). The financial statements for a parent corporation usually are consolidated with those of the subsidiaries. Financial statements generally are presented in comparative form for the current year and one or more preceding years. 1 In some cases, the statement of retained earnings is either expanded to a statement of stockholders' equity or combined with the income statement. Next, we discuss in detail the standard unmodified audit reports included in AICPA Auditing Standards Board and Public Company Accounting Oversight Board professional standards.Īuditors most frequently report upon a complete set of financial statements: that is, the balance sheet, the income statement, the statement of retained earnings, and the statement of cash flows and related notes. ![]() Because we are discussing audit reports on financial statements, we first briefly provide an overview of financial statements, including disclosures.
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