What is an audited financial statement?

An audited financial statement is any financial statement that a certified public accountant
(CPA) has audited. When a CPA audits a financial statement, they will ensure the statement
adheres to general accounting principles and auditing standards. Without this CPA verification,
investors and lenders may not be confident the statement you’re presenting is accurate.

Types of audited financial statements

There are four primary types of financial statements that may merit auditing.

1. Balance sheet: A balance sheet details your business’s total assets, shareholder

equity and debts at a given point in time. It’s often thought of as a snapshot of

your company’s financial performance. [Read related article: 4 Ways to

Boost Your Balance Sheet]

2. Cash flow statement: A cash flow statement details the amounts of cash and

cash equivalents that move in and out of your company’s bank accounts. Cash

equivalents include overdrafts, bank deposits, cash-convertible assets and short-

term investments. For this type of statement, cash includes both cash available on

hand and money stored in demand deposits.

3. Income statement: An income statement, also known as a profit and loss

statement, details your company’s revenue after all expenses and losses. Whereas

a balance sheet is a snapshot of your company’s performance at that moment in

time, an income statement captures that performance over an extended period. It

usually includes metrics such as gross profits, net earnings, revenue, expenses,

cost of goods sold, taxes and pretax earnings.

4. Statement of shareholder equity: While often included as a portion of the

balance sheet, the statement of shareholder equity can be prepared separately as

well. It details all changes to your company’s value to shareholders during an

accounting period. Increasing equity indicates good business practices, while

decreasing equity may indicate the opposite.