What are the principal financial statements prepared by the firm for external use?

Answer 1

It depends on the client, the size of the client and on who is requesting them. A set of financial statements for a public entity (SEC traded stock) will have far greater and more detailed required disclosures than will a closely held corporation, as will a governmental or non-profit entity. Governmental and non-profit entities have similar requirements, but typically governmental entities will have many times the required information that a non-profit organization would. Again this is all predicated upon size, industry, ownership, etc. As an example Sears, Inc. and John Doe's Hardware Store, Inc. are going to have different reporting requirements from lenders and governing bodies. Sears has the SEC, stockholders, lending companies, bond issues, etc to deal with and each will have detailed requirements as to what they need included in the financial statements, which will be required to be audited. John Doe only has to deal with himself and perhaps a lender - who will probably be satisfied with a compiled Balance Sheet and Income Statement. GENERALLY, a balance sheet and an income statement will be prepared, and, depending on the level of the engagement a statement of cash flows and footnotes. But as I said above... it depends.