| Audited financial statements are used to provide | | | | in the financial statement presentation, and |
| financial credibility, accountability and accuracy for | | | | comparisons of past estimates and actual results |
| a business. Only a Certified Public Accountant | | | | to support the reasonableness of their current |
| (CPA) can perform the audit, but there are steps | | | | estimates. |
| that the client can perform to reduce the cost of | | | | Lastly the accountant needs to assess the degree |
| and time necessary for the audit to be | | | | of risk that fraud will cause a misstatement in the |
| completed. | | | | financial statements, document any fraud risk |
| The accountant performing the audit will requests | | | | factors, and detail the client’s response to |
| financial reports from the company to review. | | | | these risk factors. The client should provide |
| These reports include the income statement, | | | | documentation of any fraud that has occurred, |
| balance sheet, and statement of cash flow along | | | | how they have identified any fraud risk factors, |
| with financial documentation to support these | | | | and any anti-fraud programs that have been put |
| reports. If the client has the required financial | | | | into place. |
| documents and reports prepared and available for | | | | A Client Representation letter is provided to the |
| the accountant to review, this will save time and | | | | company to sign at the conclusion of the audit. |
| money, preventing the CPA from needing | | | | They client should have documentation and |
| together this information themselves. | | | | information readily available to answer inquiries |
| The accounts receivable will need to be confirmed. | | | | that are be found in the Client Representation |
| Having a prepared accounts receivable detail | | | | letter. This letter usually includes written |
| schedule which ties into the general ledger balance | | | | statements explicitly or implicitly given to the |
| will make it easier for the accountant to confirm | | | | auditor by management; such as |
| the accounts receivable. In addition the client | | | | management’s acknowledgment of its |
| should prepare a list of names and addresses of | | | | responsibility for the fair presentation of the |
| all customers and outside entities to give to the | | | | financial statements, compliance with laws and |
| accountant for confirming receivables, business | | | | regulations, assertion that they are unaware of |
| activities, and account balances. | | | | any fraudulent activity and have implemented |
| The accountant will need to observe the | | | | procedures to detect and prevent fraud. |
| inventory count. The client should have the names | | | | From this information the CPA creates an audited |
| and addresses of public warehouses where their | | | | financial statement which will include an opinion, |
| inventory is stored readily available. If the | | | | either qualified or unqualified, about the nature of |
| inventory is on site, they should have the | | | | the financial documents. The intention of the |
| personnel who performed the original inventory | | | | audited financial statement is to gather evidence |
| count accompany the accountant on their test | | | | that will ultimately provide the auditor with a |
| counts since they are most familiar with the | | | | reasonable basis for an unqualified opinion that the |
| layout and locations of inventory. | | | | financial statements are free of material |
| The accountant needs to inquire with the | | | | misstatements or false/missing information. With |
| client’s lawyers and document any active or | | | | an unqualified opinion, the audit is found to be |
| pending litigation, claims, or assessments. The | | | | accurate, complete and fairly presented to meet |
| client should collect all documentation related to | | | | the requirements of the US GAAP (Generally |
| any litigation, claims, and assessments and provide | | | | Accepted Accounting Principles). A qualified opinion |
| their lawyers contact information. | | | | indicates that the auditor is not in agreement with |
| The accounting estimates made by management | | | | aspects of the company’s financial |
| will need to be evaluated by the CPA. The client | | | | statements or accounting procedures and is not |
| should provide documentation for the estimates, | | | | confident in the accuracy of the financial |
| factors and assumptions which affect the | | | | statements. |
| estimates, procedures used to prepare estimates | | | | |