When do I need an audit of my accounting? What options do I have? How can I assure my investors, regarding the fiscal state of my business?
When hiring a CPA, one of the more important things that you can gain from the relationship is assurance that your business is "under control" from an accounting perspective, and that accepted accounting procedures are in place and adhered to. This can be of critical importance when you are seeking outside funding from investors, or if you are applying for loans, grants or subsidies.
An audit is the highest level of financial statement service a CPA can provide. The purpose of having an audit is to provide the client with a signed opinion by the auditor regarding whether the financial statements are prepared in accordance with accepted accounting rules and within the proper financial reporting framework. An audit significantly enhances the degree of confidence lenders or investors can place in the financial statements.
A review is a "lighter" examination of the business financials, and is intended to assure that there are no obvious material changes that need to be made to the financial reports the business is generating. The CPA will make recommendations to "tighten up" certain aspects of financial accounting, and will ask questions to try to ascertain that there is no gross negligence or fraud within the organization. A review can also provide the business owner assurance that the business accounting is being handled correctly, without having to go through the rigor of a formal audit. Just like an audit, the review report is signed by the CPA.
Compilation is an engagement where the accountant is not signing-off on anything. There is no assurance about the integrity of the business accounting, nor any in-depth inspection of the accounting practices or procedures. A compilation is simply an exercise to help design, implement and render important financial statements for use by management. The accountant will spend time understanding your business, pulling together sources of financial information and formatting/presenting it in a standardized, meaningful manner.
If you would like to discuss your audit, review or compilation needs -- or even if you are not sure which (if any) of these services your business requires -- give us a call and we will be happy to review this with you.