So your company just unveiled unaudited results for FY25? Are they accurate and how much weight should I place on them?

It is reporting season soon but unaudited results are being released ahead of that by many companies and some have even done so throughout the financial year.

How much weight should you place on unaudited results as an investor? Let’s take a look at that question.

Unaudited results – what are they?

Audited results are independently verified financial statements that have been examined by an independent auditor. This is typically one of the ‘Big 4’ accounting firms (EY, KPMG, Deloitte or PwC) or another company. Unaudited results tend to come from the company’s own accounting systems – they may or not have been looked at or verified by an accountant.

Preliminary audited results are due within two months of the end of a company’s financial year while final audited results are due a month later.

A company can use whatever financial year it likes but the vast majority use either July 1-June 30 or the calendar year. This is why ‘reporting season’ occurs in August and in February.

There are some exceptions, such as New Zealand companies that use April 1-March 31 because that is the financial year in the Land of the Long White Cloud. Unlike the US, only unprofitable companies must report quarterly and they need only submit a cash flow statement.

Audited results typically represent the true financial position of a company and provide investors with assurance that the numbers they are relying on to make decisions about a business are accurate.

Unaudited results, on the other hand, are not reviewed or verified by anyone outside the company and can be subject to inaccuracies or misstatements.

Therefore, unaudited results usually cannot be relied upon as being a ‘be all and end all’ indicator of an organization’s performance or financial health.

With modern technologies, companies are more likely to get their own forecasts right. But an auditor might over-rule accounting decisions a company can make.

Most particularly, they may have their own views about the size of any impairments or depreciation decisions the company may have made. They may also have different views about when revenue should be recognised.

Ultimately, the auditor’s view will prevail because it is their reputation on the line. They have to sign off stating that they believe the results provide a ‘true and fair view’ of the organisation’s financial position.

They also need to state if they have legitimate doubt as to whether or not the company could continue to operate as a going concern. If this is stated, an ASX query will be coming the way of that particular company and they’ll have to respond to the ASX’s concerns.

The case study of Enron and its collapse (along with that of its auditor) depicts what can happen when auditors get it wrong, and that auditors can get it wrong even if they should provide a theoretical safety blanket.

So what’s the point?

Investors should not rely solely on unaudited annual results when making investment decisions, or even a one-off audited result for that matter.

They should supplement this data with other sources such as industry trends, analysis of equity markets generally as their individual company’s particular market and the company’s positioning in that market. By doing so, investors can gain greater insight into a company’s performance and potential for growth before investing any money.

And it is also important to remember above anything else that past performance is no guarantee of future success or returns. So never invest more than you are willing to lose – because you will bear all losses regardless of whether a bad investment was your mistake, or you were misled by auditors, PR/IR professionals or anyone else.

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