Determining if You Truly Need an Audit for Your Company’s Internal Financials 

Yes you can get a CPA Audit done on your company. However an audit is approximately four to five times more expense than a compilation. Frequently a banker or outside investor can be satisfied without having to go through the full expense of an audit. Knowing when to use which and the nuances thereof will do much to help ensure that you do not incur unnecessary business expenditures.

There are three levels of attestation services a CPA may provide when evaluating your business’s internal financial statements.  An informed understanding of each of the three substantially varying levels of service an outside CPA may provide will assist you in knowing which is best suited to your particular needs.  Several examples of the varying degrees of need will be noted in each of the levels described. 

Seeking out the reporting standard that meets the needs of management, investors, bankers, owner, the SEC, and other regulatory governing agencies.  Although there is some discretion in the specific application of rules, guidelines, FASB’s (Financial Accounting Standards Board) pronouncement and other governing rulings, much of what a CPA is required to do for the varying levels of service are indeed mandated by the AICPA (American Institute of CPA’s). 

Standardization of procedures and reporting is largely intended to give the public at large standards by which CPA’s are to govern their personal as well as professional ethics and standards in both the completion of attestation services and their reporting.

Audits

Audit reports are the highest level of independent CPA services available.  As such, there are more FASB’s and SAS’s (Statements on Auditing Standards) written about audits than any of the other levels of service available.  Some of the procedures required by an outside CPA in an audit environment include confirmation of bank balances, review and verification of bank reconciliation, a search for deposits in transit, a search for any unrecorded outstanding checks, confirmation with the bank of any offsetting balance requirements, lines of credit, security, debt covenants and their compliance, verification of recording of checks, receipts and an assessment of internal control.  The successful completion will require verifying all substantive balance sheet and profit and loss items, obtaining a letter of representation from the client’s attorney, being present and performing substantive verification procedures of inventory, notes payable, Board of Directors minutes and much, much more.

The purpose of an audit is to independently verify by sight, confirmation, discussion with management, assessment of internal controls and analytical procedures, that a company’s financial reports are substantively correct.  Audited financial statements will also include a statement of changes in financial and detailed and referenced footnotes detailing the companies accounting methods, policies, and certain financial data.  Again, both the statement of cash flows and the attached footnotes and the procedures and reporting thereon are governed by the AICPA, SAS’s, and other governing and regulatory agencies.

Audits, by nature of the work performed, as well as the reporting standards required, are substantially more expensive than any of the other levels of service available.  Publicly traded/SEC companies are examples of companies required to have an annual audit.  It would be prudent also to consider having an annual audit performed when someone other than the owner performs key areas of control and exposure.

Reviews

A review consist predominantly of an assessment of the company’s books and records by the performance of analytical tests, certain analytical procedures (such as the comparison to prior books and records), and calculation of certain financial tests and ratios.  There procedures, by their very nature are intended to give reasonable assurance to an outside reviewer, rather than the detailed verification and reporting requirements required by an audit.  Reviews are frequently requested by banks or insurance companies issuing performance bonds who want a higher degree of service/verification than a compilation, which is discussed next, but not the full extent and cost of an audit. Reviews typically also include a statement of changes in financial position as well as detailed footnotes.

Compilations

A Compilation is the lowest level of attestation services a CPA may provide. Essentially, a compilation is when a CPA simply compiles the books and records of a client without the performance of any substantive procedures, independent verification or confirmation of any of a clients balance.  Thus, a compilation is solely the representation of a company’s management as no verification or procedures of account balances on the balance sheet or the profit and loss statement are required.  Also, management has the option to also exclude from compiled statements the statement of changes in financial positions and all related footnotes.

At HIS CPA, P.C. we strive to be an integral part of your management team.  By keeping you better informed of your options and tax laws that affect you and your business, we remain poised to assist you as you work to successfully manage your business. Having served as a CPA in Atlanta for decades I have learned that collecting all of the information available is essential to prudent decision making. 

John Dillard is an Christian Speaker/Author and Certified Public Accountant. To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ or all John Dillard CPA today at 770.814.9304 Serving Metro Atlanta for over thirty years.

 Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!  

Serving Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, Atlanta GA, Gwinnett County, North Fulton County, Cherokee County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Marietta, Milton, Norcross, Snellville, Roswell, Buford, Smyrna, Marietta, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Decatur. Sandy Springs, Peachtree City, Douglasville, Newnan, Griffin, Woodstock, Carrollton, Forest Park, Canton, College Park, Cartersville, McDonough, Riverdale, Fayetteville, Covington, Stockbridge, Conyers, Clarkston, Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Coweta, Dawson, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Newton, Paulding, Pickens, Pike, Rockdale, Spalding, Walton, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder and Woodstock 

Atlanta CPA Provides Checklist to Ensure the Accuracy of Your Business Internal Financials

Helping clients in Metro Atlanta help themselves is one of the key operating tenants in which we help serve the Business Community. This simple and straightforward checklist will do much to ensure that you have performed an internal “gut check” on your corporations internal data before your Corporate, LLC, S Corporation or LLP return is prepared. 

Before you send your Year-End Financial please be sure that:

• The general ledger balance agrees to your checkbook and your bank reconciliation.
• The Accounts Receivable balance agrees to your internal aging reports.
• The Accounts Payable balance agrees to your internal aging reports.
• You advise of any fixed assets that have been acquired or disposed of during the year.
• That ALL of the balance sheet and profit and loss accounts are correct.
• That you have only one retained earnings account.
• That as of January 1st of the prior year that you closed the shareholder distributions account to retained earnings.
• That the retained earnings account on your internal books equals or is reconcilable to the retained earnings to the last corporate tax return filed

We do desire for our clients to become CPA’s or even good accountants, but what we do strive to do is to provide a good working knowledge of your internal books, corporate income tax returns, tax planning and personal income taxes so that by educating our clients just enough we are able to better serve our clients.

John Dillard is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (a Christian CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/  

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” 

To learn about incorporating in Georgia visit http://www.hiscpa.com/article6.html

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

Serving Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond.