What is a 'Certified Financial Statement'

A certified financial statement is a financial document, such as an income statement, cash flow statement or balance sheet, that has been audited and signed off on by an accountant. Once an auditor has fully reviewed the details of a financial statement following GAAP guidelines and is confident the numbers reported within it are accurate, they certify the documents. Certified financial statements are an important part of the checks and balances system of financial reporting. An outside, independent auditor certifying the reported details of company finances as true helps analysts be confident they are getting good information from which they can draw their valuations.

BREAKING DOWN 'Certified Financial Statement'

A certified financial statement is a financial document that has been audited and signed off on by an accountant. Certified financial statements play an important role in the financial markets. Investors demand assurance that the documents they rely upon to make investment decisions are accurate and have not been subject to any material errors or omissions by the company that compiled them. In the past, large problems have been caused by dishonest companies working with dishonest auditors to "cook the books," which resulted in overstated profits and therefore overstated valuations. Dishonest recordkeeping cheats investors and warps markets. Enron is a prime example of dishonest bookkeeping leading to a disruption of the markets and the end of a company.

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