Certified Financial Statement

What Is a Certified Financial Statement?

A certified financial statement is a financial document, for example, a income statement, cash flow statement, or balance sheet that has been audited and closed down by an accountant. When an auditor has checked on the subtleties of a financial statement following GAAP rules and is certain the numbers are accurate, they confirm the documents.

Certified financial statements are an important part of the checks and balances of financial reporting. The certification of financial statements builds investigators' confidence that they are getting great data from which they can draw their valuations.

Figuring out Certified Financial Statements

A certified financial statement is a financial document audited and approved by a certified, independent auditor and is issued with an audit report, which is the auditor's written assessment on the financial statements. The audit report can feature key disparities and detail thought fraud.

Certified financial statements are required for publicly-exchanged companies as they play an important job in the financial markets. Companies might utilize internal auditors to survey financial statements, yet they must be certified by an outside auditor, who is normally a certified public accountant (CPA).

Investors demand assurance that the documents they depend upon to pursue investment choices are accurate and have not been subject to any material errors or omissions by the company that accumulated them. Thusly, the certified financial statement ought to be clear and give an accurate account of a company's financial performance.

In the past, large issues have been brought about by exploitative companies working with deceptive auditors to "cook the books," which brought about exaggerated profits and accordingly exaggerated valuations. Unscrupulous recordkeeping swindles investors and twists markets. The Enron and Arthur Andersen scandal is a prime illustration of how unscrupulous bookkeeping prompted a disruption of the markets and the finish of two industry monsters.

26 Cents

The price of Enron stock at the hour of its bankruptcy filing in December 2, 2001.

The Sarbanes-Oxley Act of 2002 was enacted by Congress in response to numerous corporate and accounting scandals, basically the Enron scandal referenced previously. The act laid out the Public Company Accounting Oversight Board, which gives independent oversight of public accounting firms that conduct audits, specifies that outside, independent auditors conduct audits, sets standards for outer, independent auditors, and laid out different requirements and standards.

As an additional measure, this act expects auditors to present an Internal Controls Report with the financial statements. The report shows that the data is accurate inside a 5% variance and that shields are employed to safeguard financial data.

Instances of Certified Financial Statements

The three most common certified financial statements are the balance sheet, the income statement, and the statement of cash flows. The balance sheet, otherwise called the statement of financial position, gives a snapshot of a company's financial position starting around a specific date, as a rule on Dec. 31. It reports a company's assets, liabilities, and stockholders' equity.

The income statement, otherwise called the profit and loss statement, gives a summary of a company's incomes and expenses for a reporting period. Expenses are deducted from incomes to decide operating income and the main concern: net income. The outcome is either a profit or a loss, subsequently the alternate name "profit and loss statement."

The statement of cash flows reports the flow of cash all through the company during a specific period. The statement sorts activity into three fundamental categories: operating activities, investing activities, and financing activities. The statement of cash flows comes to an obvious conclusion regarding the balance sheet and the income statement. It adds setting by showing how money flowed in and out.

Features

• The Sarbanes-Oxley Act of 2002 sets standards for outer, independent auditors and expects that they present an Internal Controls Report with certified financial statements.
• The three most common financial statements are the balance sheet, income statement, and statement of cash flows.
• Certified financial statements are financial statements audited and certified by outer, independent accountants.
• Publicly-exchanged companies are required to have certified financial statements.