A company is required to prepare and maintain up to date financial statements such as balance sheet and profit and loss account. These statements provide an indication on various important aspects such as company’s financial position, its ability to survive in the long run and offer adequate returns to shareholders and so on.

Further, every company is required to pay tax on its net income as a result of which financial statements are frequently scrutinized by income tax authorities. General public prefer to invest their money in companies which provide complete transparency in respect of its business operations and financial performance.

Further, banks and financial institutions perform a credit check before extending loans to any company. Companies with strong governance processes enjoy better status and goodwill among various stakeholders. It is the responsibility of the company to ensure that all business transactions are regularly reported in its financial statements and information contained in such financial statements is accurate and reliable.

In order to ensure that financial statements are free from any kind of material misstatements, companies are required to get their financial statements reviewed by a party external to the organization. Such external party is required to comment on the correctness of figures reported in the financial statements.

Such external party is considered to be an expert in performing various auditing procedures. Even though a company may have a team of expert internal auditors, it is mandatory for almost every listed company to obtain attestation of an independent external auditor.

Meaning of Unaudited Financial Statements

Companies are required to submit their financial statements on a quarterly and annual basis. External audit of financial statements is generally performed at the end of the accounting year.

Getting financial statements audited by an independent firm is a costly process as independent auditors may charge substantial auditing fees for services provided by them.

Financial statements which have not been checked for correctness, reliability and relevance by auditors are known as unaudited financial statements.

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Meaning Of Financial Analysis In Business
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Purposes for Which Unaudited Financial Statements Can Be Used

In case of private limited company, since there is no need to disclose financial performance to shareholders and investors, a company generally relies on the information contained in its unaudited financial statements for making business decisions.

A company may hire a certified public account on its payrolls for recording and monitoring of various financial transactions. In case of listed companies, unaudited financial statements are required to be filed by the company on a quarterly basis with specified regulatory authorities.

Such unaudited financial statements are also published in newspapers/journals for providing important financial information to investors and general public.

However, while making an investment decision on the basis of unaudited financial statements, an individual should keep in mind that financial statements may not present accurate financial status in the absence of an independent evaluation by a third party.

In some cases, unaudited financial statements may be accepted by banks and financial institutions while considering a loan proposition. Since audited financial statements may not be available for the current year, financial institutions have to rely on unaudited financial statements along with previous years audited financial statements.