A:

All publicly-traded companies are required to provide financial statements, including a balance sheet, cash flow statement and income statement. To ensure that these statements are accurate and fall within the guidelines of generally accepted accounting principles (GAAP) they are audited and certified by an outside accountant. Financial statements that have been reviewed by an outside accountant are referred to as certified financial statements. However, financial statements are often released which have not been certified, known as compiled financial statements. The general reason for compiled statements being released (without being certified by an accountant) is for the timely release of financial information, as the certifying process can take a considerable amount of time.

Compiled financial statements, also referred to as unaudited statements, are not audited adequately and no opinion on the quality of the financial statements is given. Statements and guarantees about the accuracy of the financial statements are much less than that given by certified financial statements. Accountants that compile a company's financial statements are not required to verify or confirm the records and they do not need to analyze the statements for accuracy. However, in the event that an accountant finds erroneous, misleading or incomplete information in the financial statements they must notify management or abandon their involvement in assessing the company's financial statements. The accountant who is appointed to compile a company's financial statement must be familiar with the company and its main business processes.

Financial statements that are certified are the ones that an investor can trust to be the most accurate. These financial statements are reviewed and audited by a certified public accountant (CPA). The CPA offers their opinion on the quality and accuracy of the financial statements and performs a comprehensive analysis of the company. The accountant who certifies financial statements must follow the outlines provided by GAAP. Investors can use the certified financial statements with confidence when evaluating a company. When financial statements have been certified they have been reviewed to ensure the information is correct, true and reliable.

Although an investor can receive some helpful information from a compiled financial statement, it usually does not provide the certainty that is needed when deciding to invest money in a company. To have the confidence that the financial statements are accurate and reliable, an investor should turn to financial statements that have been certified by a CPA. Overall, certified financial statements can provide you with additional and more accurate information than compiled financial statements.

For further reading, see What You Need To Know About Financial Statements, Footnotes: Start Reading The Fine Print, and Show and Tell: The Importance of Transparency.

RELATED FAQS
  1. Which financial accounting statement contains information on a company's net sales?

    Find out which accounting statement contains information on a company's net sales as well as other key statements analysts ... Read Answer >>
  2. What is the difference between a cash flow statement and an income statement?

    Learn how a cash flow statement measures the sources and uses of a company's cash, while an income statement measures a company's ... Read Answer >>
  3. How do marketable securities impact a company's financial statements?

    Understand how the various components of the financial statements are impacted by investments in marketable securities owned ... Read Answer >>
  4. Which financial statements are most important when performing ratio analysis?

    Learn which financial statements are used for ratio analysis. Find out what financial data is needed to conduct fundamental ... Read Answer >>
  5. What kind of financial reporting requirements does GAAP set out?

    Look at some of the major financial reporting requirements set forth by the generally accepted accounting principles and ... Read Answer >>
  6. How do you find a company's P&L statement?

    Learn how to find a company's profit and loss statement, along with the other financial statements that companies regularly ... Read Answer >>
Related Articles
  1. Investing

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  2. Investing

    What Is The Difference Between A Cash Flow Statement And An Income Statement?

    A firm’s cash flow statement measures the sources and uses of its cash. The income statement shows how it is financially performing.
  3. Financial Advisor

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  4. Investing

    Why Financial Statements Are Harder to Read Than Ever Before

    Understand four major reasons that financial statements published in 2016 are more complicated and difficult to read than they were in the past.
  5. Investing

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  6. Investing

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  7. Small Business

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  8. Investing

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
RELATED TERMS
  1. Certified Financial Statement

    A financial statement, such as an income statement, cash flow ...
  2. Financial Statement Analysis

    The process of reviewing and evaluating a company's financial ...
  3. Financial Statements

    Records that outline the financial activities of a business, ...
  4. Account Statement

    A periodic summary of account activity with a beginning date ...
  5. Comparative Statement

    A statement which compares financial data from different periods ...
  6. Bank Statement

    A record, usually sent to the account holder once per month, ...
Hot Definitions
  1. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  3. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  4. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  5. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  6. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
Trading Center