--- title: "How to Tell If Your Financial Statements Are Accurate: 7 Questions Every CEO Should Ask" author: "Dr. Michelle Gordon, CPA, CMA, CPHR, EMBA, DBA" author_url: https://datawyse.app/blog/authors/michelle-gordon/ published: 2026-11-03 updated: 2026-11-03 canonical: https://datawyse.app/blog/how-to-tell-if-financial-statements-are-accurate/ --- # How to Tell If Your Financial Statements Are Accurate: 7 Questions Every CEO Should Ask By Dr. Michelle Gordon, CPA, CMA, CPHR, EMBA, DBA | The Clarity CFO **How can you tell if your financial statements are accurate?** Start by asking whether the accounting records are current, balances have been reconciled, financial results reflect operational reality, and appropriate controls are in place. Reliable financial oversight also requires understanding cash flow, following up on discrepancies, and ensuring reports support decisions, not simply accepting the numbers presented. ## Receiving Financial Statements Is Not the Same as Financial Oversight Most CEOs, Executive Directors, and board members receive a monthly financial package, glance at the surplus or deficit, compare actuals to budget, ask a few questions, and move on to the next agenda item. They assume that because a qualified professional prepared the report, the numbers must be accurate. That assumption can be expensive. Throughout my career as a CFO and business advisor, I've repeatedly encountered an uncomfortable reality: **Organizations often confuse having an accounting function with having financial oversight.** They are not the same thing. In one organization, professional-looking monthly reports concealed bank accounts that had not been reconciled for nine months, duplicate vendor payments, and missed payroll remittances accumulating penalties. In another, an outsourced bookkeeping firm routinely posted unsupported adjustments to accounts receivable because no one was verifying whether customers were actually paying. Neither organization set out to be reckless. Leadership believed that receiving financial reports meant someone was ensuring their accuracy. But a financial statement can look impeccable, arrive on schedule, and still be fundamentally unreliable. You don't need to be an accountant to exercise effective financial oversight. You do need to know what questions to ask, what warning signs to recognize, and when to dig deeper. Here are seven questions every leader should be asking. ## 1. Are the accounting records actually current? **Financial statements are only as reliable as the information entered into the accounting system.** A report dated at month-end does not necessarily mean all transactions have been recorded. Missing invoices, unposted expenses, unapplied customer payments, and incomplete accruals can materially distort an organization's financial position. I've seen organizations make significant decisions based on reports that were technically current but financially incomplete. An invoice sitting in someone's inbox is still an obligation, even if it hasn't reached the accounting system. When accounting falls behind, leadership can be making decisions using information that no longer reflects reality. **Questions to ask:** - Have all significant invoices, credit card transactions, and deposits been recorded through the reporting date? - Are there any known liabilities, expenses, or receipts that have not yet been reflected in these statements? ## 2. Have the financial balances been independently verified? **Reconciliations help establish whether accounting records agree with supporting evidence.** Bank balances should be reconciled to bank statements, loan balances to lender records, and receivables to supporting customer records. Without regular reconciliation and review, errors, omissions, and unsupported adjustments can accumulate unnoticed. One of the first things I examine when entering an organization is whether the balance sheet accounts have been reconciled. Not whether someone says they have been reconciled. Whether the reconciliations actually exist, are current, and have been reviewed. A balance sheet is not reliable simply because the numbers add up. **Questions to ask:** - Are all significant balance sheet accounts reconciled and reviewed each month? - Are there old reconciling items, unexplained balances, or adjustments that remain unresolved? ## 3. Do the financial results make sense given what is happening in the organization? **Accurate financial reporting should align with operational reality.** Unexpected differences between financial results and business activity deserve investigation. Revenue growth without improved cash flow, expanding programs without corresponding expenses, or staffing increases without higher payroll costs may indicate timing differences, accounting errors, or emerging operational risks. This is where leaders have an advantage they sometimes underestimate. You know your organization. You know when production has increased, when staffing has changed, when customers are slow to pay, or when a project is falling behind. That operational knowledge is an important part of financial oversight. If the numbers don't reflect what you are seeing, ask why. There may be a perfectly reasonable explanation. But that explanation should make sense. **Questions to ask:** - Do these financial results reflect what we know happened operationally this month? - What explains the most significant or unexpected differences between financial performance and business activity? ## 4. Do we understand our actual cash position? **Profit and cash are not the same thing.** An organization can report a surplus while struggling to meet payroll, supplier payments, or debt obligations. Leaders must understand cash availability, outstanding receivables, restricted funds, and upcoming commitments—not just the income statement's bottom line. This distinction is particularly important for growing businesses and nonprofit organizations. A company may be profitable on paper while its cash is tied up in receivables or inventory. A nonprofit may have a substantial bank balance, but much of that money could be restricted to specific programs. The question is not simply how much money is in the bank. It is how much is actually available to meet the organization's obligations. **Questions to ask:** - How much of our current cash balance is genuinely available for operations? - What does our cash flow forecast tell us about our ability to meet commitments over the next 13 weeks? ## 5. Who verifies the work, and what internal controls are in place? **Reliable financial reporting requires more than competent accounting staff.** Organizations need appropriate controls over transaction processing, approvals, reconciliations, and reporting. Separating responsibilities, establishing independent reviews, and monitoring unusual transactions can reduce the risk of errors, fraud, and financial mismanagement. Smaller organizations often struggle with this because they have limited resources. One person may handle invoicing, payments, payroll, and reconciliations. That does not automatically mean something is wrong. But it does mean leadership needs to understand the risks and establish compensating controls. I encourage leaders to think about financial oversight through three lenses: 1. **The Preparer:** Ensures transactions are recorded accurately and financial information is assembled. 2. **The Verifier:** Reviews reconciliations, supporting documentation, and unusual adjustments. 3. **The Strategic Leader:** Evaluates financial results, organizational risks, and implications for decisions. These are distinct responsibilities, even when a small team must share them. The goal is not bureaucracy. It is accountability. **Questions to ask:** - Who independently reviews transactions, reconciliations, and unusual journal entries? - What prevents one individual from initiating, approving, and concealing an inappropriate transaction? ## 6. When financial concerns are identified, does anyone ensure they are resolved? **Effective financial oversight requires documented follow-through.** Identifying a discrepancy is only the first step. Leaders need a process for recording financial concerns, assigning responsibility, establishing deadlines, and confirming corrective action. Without follow-through, the same issues can appear in financial reports month after month. This is one of the most overlooked aspects of governance. A board member notices an unusual balance. Management provides an explanation. Everyone moves on. Three months later, the same issue appears again. Asking questions is important. But asking questions without ensuring resolution does not create accountability. Even a simple financial issue log can make a significant difference. **Questions to ask:** - Who is responsible for resolving identified discrepancies, and by when? - Have the financial concerns raised during previous reporting periods been addressed and verified? ## 7. Do our financial reports help us make better decisions? **Financial statements explain what has happened, but effective financial oversight must also support what happens next.** Leaders need meaningful forecasts, performance indicators, and financial analysis to evaluate risks, allocate resources, and make informed strategic decisions. Historical reporting alone is rarely sufficient for forward-looking leadership. A financial package should do more than satisfy a reporting requirement. It should help answer questions such as: Can we afford to hire another employee? Are our programs financially sustainable? What happens if our largest customer leaves? How long can we operate if expected funding is delayed? If your reporting cannot help answer these questions, you may have an accounting process without the financial insight needed to lead effectively. **Questions to ask:** - What does this financial information tell us about the decisions we need to make over the next three to six months? - What risks or leading indicators should we be monitoring before they appear in our financial statements? ## Trust and Verification Are Not Opposites Effective financial oversight is not about micromanaging your accounting team or questioning everyone's integrity. It is about creating an environment where reliable information, clear accountability, and informed decisions are expected. Good financial professionals generally welcome thoughtful questions because those questions can help identify problems, clarify priorities, and secure the resources needed to improve reporting. And leaders have a responsibility to ask them. **Trust without verification creates vulnerability. Verification without trust creates bureaucracy. Good leadership requires both.** You do not need to become an accountant to protect your organization's financial health. You need to understand what matters, recognize when something doesn't make sense, and ensure someone is accountable for finding the answer. Because the real question isn't whether your financial statements look professional. **It's whether you have enough confidence in the information to make the decisions your organization depends on.** ## Build Confidence in Your Financial Oversight If you're a CEO, Executive Director, business owner, or board member who wants to feel more confident reviewing financial information, I've developed a practical course specifically for you. **Financial Oversight for CEOs, EDs & Boards** helps non-financial leaders understand their organization's financial position, ask better questions, recognize warning signs, and establish accountability. You'll learn how to move beyond simply receiving financial reports and start using them to lead with greater clarity and confidence. ## Frequently asked questions ### How can you tell if your financial statements are accurate? Start by asking whether the accounting records are current, balances have been reconciled, financial results reflect operational reality, and appropriate controls are in place. Reliable financial oversight also requires understanding cash flow, following up on discrepancies, and ensuring reports support decisions, not simply accepting the numbers presented. ### What questions should a CEO ask about financial statements? Here are seven questions every leader should be asking. 1. Are the accounting records actually current? 2. Have the financial balances been independently verified? 3. Do the financial results make sense given what is happening in the organization? 4. Do we understand our actual cash position? 5. Who verifies the work, and what internal controls are in place? 6. When financial concerns are identified, does anyone ensure they are resolved? 7. Do our financial reports help us make better decisions? ### Is receiving financial statements the same as financial oversight? Organizations often confuse having an accounting function with having financial oversight. They are not the same thing. But a financial statement can look impeccable, arrive on schedule, and still be fundamentally unreliable. You don't need to be an accountant to exercise effective financial oversight. You do need to know what questions to ask, what warning signs to recognize, and when to dig deeper. ### Why can a profitable organization still run out of cash? Profit and cash are not the same thing. An organization can report a surplus while struggling to meet payroll, supplier payments, or debt obligations. A company may be profitable on paper while its cash is tied up in receivables or inventory. A nonprofit may have a substantial bank balance, but much of that money could be restricted to specific programs. ### What internal controls does a small organization need? One person may handle invoicing, payments, payroll, and reconciliations. That does not automatically mean something is wrong. But it does mean leadership needs to understand the risks and establish compensating controls. The Preparer: Ensures transactions are recorded accurately and financial information is assembled. The Verifier: Reviews reconciliations, supporting documentation, and unusual adjustments. The Strategic Leader: Evaluates financial results, organizational risks, and implications for decisions. These are distinct responsibilities, even when a small team must share them. ### What should happen when a financial discrepancy is found? Identifying a discrepancy is only the first step. Leaders need a process for recording financial concerns, assigning responsibility, establishing deadlines, and confirming corrective action. Without follow-through, the same issues can appear in financial reports month after month. Even a simple financial issue log can make a significant difference. ## About the Author Dr. Michelle Gordon, CPA, CMA, CPHR, EMBA, DBA is a CFO, entrepreneur, and leadership researcher. Through The Clarity CFO, she combines financial expertise with practical leadership experience to help executives and boards strengthen oversight, challenge assumptions, manage risk, and make better decisions. Her work explores the intersection of finance, governance, and leadership. LinkedIn: https://www.linkedin.com/in/michelle-m-gordon/ ## References and Further Reading - Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2013). *Internal Control—Integrated Framework.* https://www.coso.org/internal-control - Chartered Professional Accountants of Quebec. (2025). *CPAs and financial statements.* https://cpaquebec.ca/en/general-public/the-profession-at-a-glance/cpas-and-financial-statements - Government of Canada, Treasury Board of Canada Secretariat. *Guidelines for audit committees in Crown corporations and other public enterprises.* https://www.canada.ca/en/treasury-board-secretariat/services/guidance-crown-corporations/guidelines-audit-committees-crown-corporations-other-public-enterprises-guidelines-exemptions-internal-audit.html Source: https://datawyse.app/blog/how-to-tell-if-financial-statements-are-accurate/