What is the Importance of Audited Financial Statements?

Frequently, the audit report is viewed by the city council and staff as highly technical and serving only the needs of higher authorities. All too often, once the audit report is received, it is placed on the shelf with the audits of all prior years and begins to gather dust. However, the information contained in the audit report is imperative to obtaining an accurate picture of the government’s financial wellbeing. For example, auditors routinely adjust the government’s financial information when preparing the audited financial statements. The adjustments generally fall into two categories: adjustments due to erroneous misstatements and 
adjustments due to intentional misstatements. Erroneous misstatements are likely the result of accident. Intentional misstatements, on the other hand, are the result of willful decisions, such as choosing not to apply an accounting standard or attempting to conceal fraudulent activities. In either case, by having the financial statements verified by an independent, external party, the audited financial statements should present information that is more faithfully representative of the actual financial position of the government. Furthermore, the audited financial statements present the ideal opportunity for the clerk‐treasurer to perform
his/her annual financial trend monitoring. It is also an ideal time for the council members to educate themselves on the formal financial statements of their government, becoming aware of any emerging trends and improving their understanding of the “big picture” of their local government’s finances.