Are Audited Financial Statements Necessary?
The short answer is,it depends.
Before I expand on this,lets understand what an Audit is.
According to the American Institute of Certified Public Accountants,
the auditor plans and performs the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
An audit provides a high level of assurance,not a guarantee of accuracy.An audit is an attest engagement
Another way to obtain assurance is with the Review Engagement,another attest engagement.According to the Statements on Standards for Accounting and Review Services (SSARSs), the CPA obtains limited assurance that material changes to the financial statements are not necessary in order for the financial statements to be in conformity with General Accepted Accounting Principles (GAAP).A review provides a medium level of assurance.
We also have the Compilation engagement which in accordance with SSARSs does not provide a basis for obtaining or providing any assurance regarding the financial statements.
Each of these attest services have different procedures and different fees charged.The Audit engagement is the most time consuming and the most expensive.
Of course there are cases where you are required to provide Audited financials like in the case of Franchising.
A lot of banks ask for financial statements as a requirement of providing the customer with a loan. It is important you ask your banker which type of report they need.
If they can approve your loan with compiled financials then,there is no need to pay for audited financial statements.