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　　Financial Statement And External Auditing
　　Contents

Chapter	Section	Topic
Financial Statement	I	Balance Sheet
	II	Income Statement
	III	Statement of Cash Flows
External Auditing	IV	Standard Unqualified Audit Report
	V	Persuasiveness of Evidence

　　01Chapter One Financial Statement
　　Section I Balance Sheet
　　A balance sheet, also called the statement of condition or statement of financial position, provides a wealth of valuable information about a business firm, particularly when examined over a period of several years and evaluated in relation to the other financial statement. A prerequisite to learning what the balance sheet can teach us, however, is a fundamental understanding of the accounts in the statement and the relationship of each account to the financial statements as a whole.
　　The balance sheet shows the financial condition or financial position of a company on a particular date. The statement is a summary of what the firm owns （assets） and what the firm owes to outsiders （liabilities） and to internal owners （stockholder’s equity）. By definition, the account balances on a balance sheet must balance; that is, the total of all assets must equal the sum of liabilities and stockholders’ equity. The balancing equation is expressed as:
　　Assets = Liabilities + Stockholders’ equity