Audit and Assurance
Financial Statements Audit: An unbiased, professional opinion
This opinion is given to the business’ upper management team and other parties that require an audited financial statement such as the Securities and Exchange Commission (SEC).
In preparing a Financial Statements Audit, an independent CPA forms an opinion as to whether a business has represented the following fairly and accurately:
Changes in net assets
Informing their opinions, CPAs are mandated to carry out procedures according to Generally Accepting Auditing Standards (GAAS). These Standards were prepared by the American Institute of Certified Public Accountants (AICPA) – Auditing Standards Board (ASB). GAAS is a global framework for auditing. GAAS demands that auditors plan and perform their audit to obtain reasonable assurance (which is a high, but not absolute, level of assurance) that financial statements are free of material misstatement, whether caused by error or fraud.
Accredited CPAs, only.
Note that not all CPAs are authorized to perform or sign financial statements. To conduct a Financial Statements Audit, a CPA must be accredited by the BIR as a tax agent and the Board of Accountancy-Philippine Regulation Commission.
Businesses that submit a financial statements audit that is signed by a non-accredited CPA will be penalized, while the license of the CPA may be revoked. It is the responsibility of the business to make sure that the CPA who signs its audit is genuinely accredited.
Required and recommended.
Sole proprietorships are not required to perform a Financial Statements Audit or submit an audited financial statement to the BIR if the individual chooses to file using the Optional Standard Deduction. There are advantages, however, of having a Financial Statement Audit conducted as a sole proprietorship, which includes:
- The correct value is placed on assets, liabilities and equities
- In-house or outsourced bookkeeping and accounting is verified
- Securing bank loans or making business proposals is facilitated
On the other hand, the SEC requires all corporations without exception to undergo a Financial Statements Audit and submit an audited financial statement stamped as “filed” by the BIR.