{"id":101128,"date":"2022-08-22t13:00:10","date_gmt":"2022-08-22t17:00:10","guid":{"rendered":"\/\/www.g005e.com\/?p=101128"},"modified":"2024-08-07t23:10:40","modified_gmt":"2024-08-08t03:10:40","slug":"when-an-audit-is-a-great-thing","status":"publish","type":"post","link":"\/\/www.g005e.com\/2022\/08\/22\/when-an-audit-is-a-great-thing\/","title":{"rendered":"when an audit is a great thing"},"content":{"rendered":"
<\/a>bonus breakdown: audits vs. reviews vs. compilations.<\/strong><\/p>\n by ed mendlowitz<\/em> one of my clients generously gave me his take on the benefits he received from the audited financial statements we issued for him. i was appreciative of this and want to share his views with you.<\/p>\n more on advisory: <\/b>how to read a financial statement<\/a>\u00a0|\u00a0the kpi an absentee manager needs<\/a>\u00a0|\u00a0which kpis do you need?<\/a>\u00a0|\u00a077 thoughts about client needs<\/a> | the seven-minute financikal statement<\/a> he began with an introduction explaining how he started his business and shepherded its growth by concentrating on developing his services and delivering them quickly and on time to his clients. the business grew rapidly, and little time was spent on the recordkeeping except for getting invoices to the clients or making payroll, while keeping the back office as lean as he could. at the same time there were legal, regulatory, hr, occupancy and tax issues from operating in multiple states and countries and he was spending quite a lot of time and fees on these activities, because he had to, while pushing aside and neglecting the accounting work. he told me about the many users of his financial statement and how it helped him.<\/p>\n financial accountability mattered. besides the above benefits it provided a broader landscape, greater controls and more effective procedures, and set in motion a pattern of solutions-based recognition. it also put the company in a position to attract key personnel, possible merger candidates, a presentation to potential acquirers (which they were not considering but kept the door open to dialogues), companies they could collaborate with, technology and marketing consultants who could suggest systems that could move the company forward, and a strategy to achieve better client service, organic growth and customer referrals.<\/p>\n he called us in because he needed the reports and got so much more; he got control over his company. audited statements do matter and provide benefits far more extensive than what appears from the 25- or 30-page report. if you are a growing business, discuss with your accountant the advisability of an audit.<\/p>\n the most frequently prepared reports by cpas are audits, reviews and compilations. here are descriptions and differences of each. note that some of these are continuously being changed so before using them, check out the current information.<\/p>\n audits<\/strong><\/p>\n an audit of financial statements (which is sometimes referred to by the general public as a certified report) is the highest level of financial statement attest reporting and only independent cpas can perform this service. the purpose of an audit is to provide reasonable assurance that the financial statements are free of material misstatement.<\/p>\n an audit includes examining on a test basis documentation supporting the amounts and the notes in the financial statements; assessing the accounting principles used and significant estimates made by management; as well as evaluating the overall financial statement presentation. during the audit, the cpa obtains third party evidence; performs analytical and ratio analysis; and makes inquiries of management to determine if the information contained in the financial statements is free from material misstatement<\/p>\n the procedures are performed using generally accepted auditing standards (gaas) and the report states whether the financial statements have been prepared under generally accepted accounting principles (gaap) or another accounting framework.<\/p>\n auditors are responsible to assess the risk of material misstatement, whether due to fraud or error and management has a duty to design policies and procedures to help prevent fraud and to perform periodic internal reviews to ensure that transactions are recorded properly by their staff.<\/p>\n users place the highest reliance on audited statements.<\/p>\n reviews<\/strong><\/p>\n review reports provide limited assurance that the financial statements are free of material misstatements.<\/p>\n a review consists of principally inquiries of company personnel and analytical procedures applied to financial data. it is substantially less in scope than an audit performed in accordance with gaas.<\/p>\n during a review, the cpa will perform some analytical procedures and ratio analysis and ask questions of management about items contained in the financial statements that appear to be different than expected and to determine whether they became aware of any material modifications that should be made to the financial statements for them to be in conformity with the appropriate accounting reporting framework. review reports will contain a complete set of notes to financial statements, as do audited reports. the accountant must be independent.<\/p>\n compilations<\/strong><\/p>\n compilation reports provide no assurance that the financial statements are free of material misstatements. a compilation consists of presenting in the form of financial statements information that was submitted by management. during a compilation, the cpa will \u201cread\u201d the financial statements to determine if they appear to be free from obvious material misstatement. financial statements which have been compiled may or may not have to include notes to financial statements. if notes to financial statements are not included, that fact should be specified in the compilation report. the person or firm issuing the compilation does not have to be independent but if they aren\u2019t, their lack of independence must be stated in the report.<\/p>\n other financial statement and reporting and attestation services<\/strong><\/p>\n besides the traditional services described above, cpas also may be asked to prepare prospective and forecasted statements, organizational budgets, personal financial statements, or other reports such as for construction bonds, letters of credit, third party guarantees and sec and finra regulation compliance and forensic audits and special engagements designed to uncover or inhibit fraud.<\/p>\n additional information<\/strong><\/p>\n the basic financial statement services have been briefly described. if you would like additional information, consult with the professional standards.<\/p>\n","protected":false},"excerpt":{"rendered":"
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\nbecause of his company\u2019s success, a dire need developed for additional capital, and no one would speak to him without the appropriate financial statements. that is when he reached out to us. we assessed the situation, developed a plan and timetable and sent in a team to organize his system and get him what he needed. we did and he reaped the expected benefits. the benefits also came because of his business model, client base and delivery of his services.<\/p>\n\n
financial statement reports<\/h3>\n