The Small Business Controller

Chapter 4

A Complete Set of External Financial Statements

This chapter focuses on the preparation of a complete set of financial statements for external parties. We discuss the three distinct parts to external financial statements—the accountant’s report, the four financial statements, and the notes. The chapter concludes with a discussion and illustrations of three distinct reports often prepared by outside CPA firms—compilations, reviews, and audits.

Three Distinct Parts to a Set of External Financial Statements

As noted in chapter 3, many users have different needs for financial statement information. Previously, mostly internal users of information were discussed; however, external users, such as bankers, major creditors, suppliers, and ...