Financial Statement Analysis
Financial statement analysis is an appraisal of a company's previous financial performance and its future potential. The CPA is often involved in analyzing the financial statements of an existing client, prospective client, or targeted company for a potential acquisition. Financial statement analysis aids the CPA in determining what areas to audit and in appraising the overall health of the business. A going-concern problem may be identified. After the CPA completes the financial statement analysis, he or she should consult with management to discuss their plans and prospects, identify problem areas, and offer possible solutions.
This chapter covers:
Why analyze the financial statement?
The CPA analyzes the financial statement of a client for a number of important reasons: