What are Audited Financial Statements?

Audited financial statements are the financial statements of an organization that have been examined by a certified public accountant (CPA). Audited financials include a signed statement from the auditor, saying that the financial statements present fairly the results, financial position, and cash flows of the issuing entity. The reports included in audited financial statements are as follows:

Income statement. The income statement presents the revenues, expenses, and resulting profit or loss of the reporting entity for the reporting period.
Balance sheet. The balance sheet presents the assets, liabilities, and shareholders’ equity of the reporting entity as of the end of the reporting period.
Statement of cash flows. The statement of cash flows presents the operating, financing, and investing cash flows of the reporting entity for the reporting period.

Most larger organizations and all publicly held companies issue audited financial statements.

The auditor's statement is most valuable if it is unqualified, which means that the issuing entity was in compliance with the applicable accounting framework (such as GAAP or IFRS) in all respects. If the statement is qualified, it means that the auditor took exception to certain aspects of the financial statements, or the underlying information used to construct the statements.

Who Uses Audited Financial Statements?

Audited financial statements are required by numerous parties - investors, lenders, and stock exchanges - so that users can have confidence that the information in the statements is correct. In particular, a lender nearly always demands that a prospective borrower produce audited financial statements before it will agree to loan any funds.