Financial Statement Audits
Studies have shown that small businesses that have their financial statements audited by a certified public accountant improve their chances of getting a loan and at far better terms. According to a study of 10,000 closely held companies by the University of Chicago, audited businesses save an average of $6,900 each year for every $1 million in outstanding debt due to lower interest rates. These interest rates were more than half a percentage point below rates paid by non-audited businesses.
Audits of financial statements are often required by financial institutions lending funds to their business customers and by shareholders of small- and medium-size corporations. An audit includes procedures to examine, on a test basis, the evidence supporting the amounts and disclosures in the financial statements. The objective of a financial statement audit is to provide reasonable assurance to the users that the financial statements are free of material misstatement and fairly presented in accordance with accounting principles generally accepted in the United States.
- Standard – Audited financial statements including a statement of cash flows and notes to the financial statements.
- Enhanced – Standard audited financial statements including a financial performance analysis and a management advisory comments letter.
- Premium – Enhanced audited financial statements including a financial performance discussion, financial reporting scorecard, and assistance in preparing an executive summary of the financial statements as a marketing tool.
Financial Statement Reviews
Your Aunt Betty may do a great job reconciling her bank statements and organizing her grocery receipts at her kitchen table, but she can’t perform a review of your financial statements. Only CPAs are authorized to to review financial statements, which involves analyzing trends and ratios, asking questions to understand the business, and preparing footnotes to the financial statements that explain the transactions and balances. A review gives a loan officer or bonding company some limited assurance that the financial statements are correct and can be relied upon for making a loan decision.
Reviews of financial statements are often required by financial institutions lending funds to their business customers and by shareholders of small- and medium-size corporations. A review includes inquiry and analytical procedures that provide limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States or, if applicable, with any other comprehensive basis of accounting.
- Standard – Reviewed financial statements including a statement of cash flows and notes to the financial statements.
- Enhanced – Standard reviewed financial statements including a financial performance analysis and a management advisory comments letter.
- Premium – Enhanced reviewed financial statements including a financial performance discussion, financial reporting scorecard, and assistance in preparing an executive summary of the financial statements as a marketing tool.
