Are you wondering what the difference between audited and unaudited financial statements is? You are in the right spot! In this blog post, we compare the two financial reports. After reading it, you will get a good idea of how unaudited and audited financial statements differ and which one is suitable for your company.
But before we dive in, first things first:
Why do companies need financial statements?
Companies have to prepare financial statements at the end of each financial year. According to the Income Tax Act and Tax Administration Act, companies must submit financial statements to SARS.
Financial statements present essential information about a company’s financial position, from revenue to expenses, profitability, debt, creditors, and more. Business owners and investors use financial statements to assess their ability to meet their short-term and long-term financial obligations.
What are Audited financial statements?
According to the Companies Act of 2008 or regulation 28, private or personal liabilities, companies must file a copy of the latest approved Audited Financial Statements on the date that they file their annual return with the CIPC.
CIPC expects the following private companies to submit audited annual financial statements: – Any private or personal liability company if, in the ordinary course of its primary activities, it holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
– Any private or personal liability company that compiles its financial statements internally. For example, its financial director or one of the owners has a Public Interest Score (PIS) of 100 or more.
– Any private or personal liability company that has its financial statements compiled by an independent party (such as an external accountant) and that has a Public Interest Score (PIS) of 350 or more;
– All public and state-owned companies must file a copy of the latest approved Audited Financial Statements on the date that the annual returns are filed with the CIPC.
By law, all companies need their Annual Financial Statements to be audited and an Auditor’s Report signed off by a qualified Auditor. Specific accounting qualifications empower auditors to perform audits that ordinary bookkeepers do not have.
An auditor can issue one of the following reports:
Unqualified Report An unqualified audit report means an Auditor has carried out a thorough audit of a company’s internal control systems, financial statements, and all supporting documents. The report reflects fair and transparent financial statements in compliance with generally accepted accounting principles (GAAP).
Qualified, Disclaimer or Adverse Report
On the other hand, a qualified report means based on the evidence that the auditor has collected, she has concluded that the financial statements are not free from material misstatement. Or have an error, which means they do not represent an accurate and fair view of the company’s financial position.
Unaudited financial statements
Unaudited financial statements mean the financial statements do not carry an audit disclaimer. But they only represent financial information that a company has prepared, and therefore the investors and money lenders can never be sure whether this information is materially correct or not.
Remember, the Auditor’s report carries legal weight, so it’s essential to hire only a qualified Auditor to audit your financial statements.
Are you looking for an independent auditor to verify your financial statements? Send us an email today at info@ mgt-accounting.co.za