Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company. Each of the various parties have different levels of risk tolerance, so we provide three levels of assurance to meet your needs.
An audit provides the highest level of assurance. An audit is a methodical review and objective examination of the financial statements, including the verification of specific accounting documents and information as determined by the auditor or as established by AICPA professional standards and practices.
Our work includes a review of internal controls, testing of selected transactions, and communication with third parties. Based on our findings and audit documentation, we issue a report on whether the financial statements are fairly stated and free of material misstatements.
An Audit allows you to:
The following is what you receive from having our firm perform an audit….
You get the highest level of assurance because we go outside your company to obtain and verify information. Typically, we’ll have written communication with:
We also perform physical inspections by observing your inventory counting methods and perform test counts. We document and test each operating cycle, including sales and cash receipts, expenses and cash disbursements, and payroll. Our audit papers include a detailed work program to document the examinations and testing performed, as well as the client’s supporting work papers.
Audits Are Not Just for Publicly Traded Entities
All public companies are required to have an annual audit, but some nonpublic entities must undergo an annual audit as well. These include local governments, not-for-profit agencies and other organizations receiving government grants.
Moreover, some financial institutions require audits of nonpublic companies based on the financing amount and/or the bank’s assessment of the company’s risk. Also, companies with absentee ownership (such as those owned by investment firms, or individuals who no longer run the business) may order audits as checks of their management teams.
A review engagement is conducted by the CPA to provide limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the financial reporting framework. A reviewed statement is more complex and generated using the accrual accounting method. The CPA will verify your account balances and provide a full set of footnotes.
Reviews consist of the following procedures
Reviews are used by clients signing new leases and vendor/ supplier s relationships where the party requesting the information wants more assurance that the financial statements are presented properly.
A compilation is financial information prepared by the CPA in the form of financial statements based on information provided by the client. The accountant does not provide any assurance that there are no material modifications that should be made to the financial statements so they will conform to the acceptable financial reporting standards. The CPA report does not express an opinion regarding the financial statements. Compilations are typically done for clients who are signing new leases, obtaining a line of credit with a vendor or supplier or by a company looking to review the financial status of an ongoing vendor relationship.
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