Audit - Highest Level of Assurance
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 information as
determined by the auditor or as established by general practice.
Our work includes a review of internal
controls, testing of selected transactions, and communication with third
parties. Based on our findings, we issue a report on whether the financial
statements are fairly stated and free of material misstatements.
An Audit allows you to...
- Satisfy
stakeholders such as employees, customers, suppliers and pressure groups,
as well as the investing community, as to the credibility of published
information.
- Facilitate
the payment of corporate tax, goods and services tax, and other taxes on time
and accurately, thereby avoiding interest, penalties, and investigations.
- Comply
with bank covenants.
- Help deter
and detect material fraud and error.
- Facilitate
the purchase and sale of businesses.
Here's what you get...
You get the highest level of assurance
because we go outside your company to obtain more information. Typically, we'll
have written communication with:
- Your
customers, to check outstanding receivable balances
- Your
banks, to confirm cash and/or debt balances and terms
- Your
vendors, to verify outstanding payable balances
- Your
attorneys, for information on pending or threatened legal action
We also perform physical inspections by
observing your inventory counting methods and performing 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 Not Just for Public
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 require audits as checks of their management teams.
Review - Limited Assurance
Less extensive than an audit, but more
involved than a compilation, a review engagement consists primarily of
analytical procedures we apply to the financial statements, and various
inquiries we make of your company's management team. If the financial
statements or supporting information appear inconsistent or otherwise
questionable, we may need to perform additional procedures.
A review does not require us to study and
evaluate your company's internal controls or verify data with third parties or
physically inspect assets. Rather, a review report expresses limited assurance
in the form of the statement: "We are not aware of any material
modifications" for the financial statements to be in conformity with the
Generally Accepted Accounting Principles (GAAP). Reviewed financial statements
must include all required footnotes and other disclosures.
Why might a business request a review
engagement? It can be a good middle ground, providing the advantages of a CPA's
technical expertise without the work and expense of an audit.
Compilation - Lowest Level of Assurance
In compiling financial statements for a
client, we present information that is the "representation of
management" and express no opinion or assurance on the statements.
Compilations do not require inquiries of management or analytical procedures.
Instead, we rely on our knowledge of accounting principles and a general
understanding of your business.
Banks often require compilations from an
independent CPA as part of their lending covenants.
Which Report Should You Use?
Each type of financial statement report may
suit specific circumstances, depending on requirements from your client's bank
or other parties, as well as meet budgetary needs.
Understanding each report's
unique strengths and weaknesses can help you choose the most appropriate one.
Please call if you have questions about which type of report is right for you.
