Management prepares a company’s financial statements, reviewed by the Board and audited by an independent firm
What's Happening
Management prepares the company’s financial statements under the oversight of the Board of Directors and independent auditors
Right now, management teams—including CFOs and accounting staff—still handle the actual preparation of financial statements. These documents (think income statement, balance sheet, cash flow statement, plus notes) get put together following standards like IFRS or ASPE in Canada. Once management finishes the work, the Board of Directors reviews and signs off before anything becomes final. Then an independent auditor comes in to verify the statements are accurate and follow all the rules, though they never prepare the statements themselves. Honestly, this separation matters—it keeps financial reporting transparent and trustworthy. According to the CPA Canada, this setup helps avoid conflicts of interest and keeps disclosures objective.
Step-by-Step Solution
Financial statements are prepared through a systematic process governed by accounting frameworks like IFRS or ASPE
Here’s how it usually works: First, gather every scrap of financial data from the reporting period—transactions, invoices, receipts, bank statements, the works. Get it all recorded accurately in the accounting system. Next, the income statement goes together to show revenue, expenses, and net income. Then comes the balance sheet, detailing assets, liabilities, and equity as of the reporting date. Don’t forget the cash flow statement to track where money’s actually moving. Finally, add notes and disclosures to explain things like changes in accounting policies or major events. For Canadian private companies with revenue and assets under $1 million as of 2026, Form T1178 might be enough for tax purposes. Bigger companies or public ones face stricter rules. The Accounting Standards Board (AcSB) keeps everyone on the same page with consistent guidance.
