A financial audit typically refers to the annual audit of an organization’s financial statements to ensure its records are a fair and accurate representation of the organization’s financial transactions. The financial statement audit looks to understand the financial performance of an organization to provide reasonable assurance of the future performance of a company.
Often based on GAAP standards, the audited financial statements are reviewed yearly by independent auditors and include the income statement, balance sheet, and cash flow statement. GAAP stands for the generally accepted accounting principles and determines the set rules and accounting standards for presenting financial information to stakeholders.
A financial audit can also include an audit of the organization’s internal control over financial reporting, which is commonly integrated with an audit of financial statements.
Both internal auditors and external auditors can conduct financial audits.
The biggest difference between external and internal audits is the objectivity and independence of the external audit firm’s opinion on the financial statements and internal controls audited.
Nonprofit audits are required based on annual revenue thresholds, and they can also be necessary to meet specific grant, lender, or federal funding requirements. The Virginia Department of Taxation may require a financial review or a full audit, and nonprofits that solicit funds must also follow regulations from the Department of Agriculture and Consumer Services (VDACS).
At Crystal Cherie, CPA we are here to help. Whether you are in need of a financial audit, review, or compilation services or in need of audit readiness consultation, we have you covered.