Understanding Unaudited Financial Statements

Unaudited Financial Statements are the information provided by the company that have not been externally audited by an accountant or a certified accountant. They offer a true and fair view of company‘s financial reporting in the form of income, balance and cash flow statement. Un-audited financial statements are produced faster and more cheaply as compared to audited statements because they are not verified by an accountant or certified accountant.

A major benefit of unaudited financial statements is speed and flexibility. If the company is able to produce a statement monthly or quarterly, the management team will be able to see if the business is performing financially well, keep track of cash flow, and react to situations quickly. Not all SME‘s will have enough time or the resources to hold regular audits, therefore, the ability to produce unaudited statements is advantageous. They may also be tailored to require particular data to be included or excluded.

Nevertheless, unaudited financial statements suffer from the following drawbacks: they are less reliable since they have not been verified externally, there might be material errors or omissions or misstatements; potential users of financial and management reports such as investors, banks, authorities might have less confidence on these unaudited financial statements and they might not be used so much in making significant decisions; they are mainly for in-house use, preliminary analysis or short-term planning.

Despite their shortcomings, unaudited financial statements are a key indicator of a business. These balance sheets and income statements can be utilized for a variety of reasons, such as budgeting, forecasting and giving an overall indication of the health of the business without the time and expense of an audit. With proper accounting processes, they will provide these indicators. Singapore Accounting is preferable for Unaudited financial statements.