We all face numbers, sometimes on a daily basis.

Most of us deal with invoices and receipts. Some of us deal with investment reports, bank account reports and stock market updates. Accountants prepare and use companies' filed statements, tax returns and many other sources of financial information.

Many CPAs and financial examiners can be asked, as part of their job, to provide their opinions on the reliability and accuracy of financial information. They can also be involved in testifying in court on the validity, reliability and accuracy of financial information presented by individuals, organizations or other parties. Other financial professionals are required to make judgments on the health of companies using the financial reports filed by them with different governmental offices, as well as the accuracy of financial data reported in those reports. Other parties, financial and non-financial, rely on and use these judgments, opinions and certifications while making decisions. This can be seen in court orders, investment decisions, loan approvals, contracts and agreements, etc.

Can these accounting professionals and financial examiners accept the financial information provided by others at face value without making additional efforts to verify and validate the story behind these numbers? Every number presented has a story behind it, whether in a contract agreement, a contract settlement, or a recorded transaction. Every number has a decision behind it, a decision to present the number in a certain way. Rules and regulations affect and direct the decision to present the information in a certain way.

So, what are the steps that a financial professional should follow to make an educated opinion on the reliability of the financial information presented?



Finding the data is the most critical step in verifying financial information, as it requires the skills of asking the right questions and analyzing the answers to these questions.

Information filed with the government can be used to trace and evaluate the information in the reports the accountant is examining. For example, filed tax returns can provide information about taxes paid or received, transactions that have tax effects, new lines of business, or the types and number of entities within a group or a company.

Even if the information filed with the government is inaccurate, it can be useful in examining other information. Although manipulated information is unreliable, it can give a clue about what the actual information should have been.



Accounting professionals and financial examiners can also search for other sources of data to validate the numbers and form an opinion on the reliability of those numbers. Analyzing source documents such as contracts, receipts, invoices and financial documents can help determine the accuracy of the information reported.

Confirmation with outside or related parties of the financial transactions between them and companies can be a critical tool in validating these transactions. Confirmation can be attained by means as simple as sending e-mails or letters to outside parties, or calling these parties to confirm the detailed information about those transactions. Documenting outside parties' confirmation will be crucial in the process of proving the reliability of the information.

Requesting exchanged information between a company and its external auditors can reveal the story behind the reported numbers and the consent that had been reached between the parties. Although concealment can be perpetrated between the company and its external auditors, understanding the company's financial and legal position can make a difference in the judgment reached by professionals.

Going beyond the traditional tools to search for other documents can help with understanding the numbers reported. Reading the minutes of the board meetings held by a company throughout the year - if the company allows - can reveal the strategies utilized by the company to record and report the numbers as presented in its reports.

Reading other reports filed by the company and tying back these reports to the information provided can help professionals in making a rational judgment about the consistency and accuracy of information processed by the company.



After gathering the right documentation, analyzing those documents can begin. This step is critical in the verification process, as final opinions will be based on analyzing those documents and finding the truth behind the story of the numbers. Analyzing documents can be a very labor-intensive and time-consuming process, but the outcome will be worthwhile. Analyzing documents can break the web of confusion that a company deliberately created and reveal the truth that a company wants to hide.

Accounting professionals and financial examiners can analyze the documents by verifying that the numbers were consistently carried forward from one report to another, and by tying these back to the source documents. Professionals can also develop their own scenarios of how the numbers should be recorded and reported within the statements. Then they should juxtapose those scenarios against the actual information reported.

It is very important for the accounting and financial professional to give an opinion based on verified information, because many parties rely on their judgments and opinions in making other related decisions.

Due diligence and careful investigation before financial reports are finalized serve as preventative tools to thwart manipulated and misleading information from appearing on the reports. Manipulated and misleading information can negatively affect other parties' decisions. This negative impact can be prevented if accounting professionals and financial examiners spend adequate time in verifying the numbers reported in financial statements.



Ashraf Elkotaney, CPA, CFE, CMA, CFM, is a financial reporting manager at Universal Holdings Insurance in Fort Lauderdale, Fla.

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