If you’ve ever been through a financial audit, you know they are time consuming and exhausting. Not to mention expensive. What if you could reduce the possibility of needing audited financials? Fortunately, you can. The answer is an annual financial review. They are less time consuming, less costly, and take less time away from you and your staff’s day-to-day business.
As a business owner, you accepted an element of risk the day you decided to launch your business. Continually monitoring and managing that risk affects every decision you make; every relationship you form.
Though annual reviews can help reduce your need for an audit, there are times an audit may be unavoidable, such as:
- Financing for business expansion
- Compliance
If you’re talking to lenders or investors about funds for expansion, you can be certain they’ll want reasonable assurance you’re worth the risk.
Depending on the nature of your business, and the industry in which you operate, you may be required to provide regular, audited financial statements to a government regulator. When audited financials are required, the auditor’s opinion is the assurance needed to provide a high level of confidence your company’s financial statements and disclosures conform to generally accepted accounting principles (GAAP) in the United States of America are presented fairly, and are free from any pertinent misstatements. However, if none of this applies to you, you might want to opt for reviews rather than audits.
How is an Annual Financial Review Different from an Audit?
A review is an examination by a CPA, where the auditor evaluates financial data to provide moderate assurance that they are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with GAAP. Due to the limited scope, a review has significantly less impact on time spent by staff and management than an audit.
While an audit and a review differ in their scope, they both consist of a systematic examination of the inputs to the financial statements in order for the accountant to provide a report which will, hopefully, state that the financials are free of material misstatements, and are prepared in accordance with GAAP.
HKMP can help you determine if, and when your company requires an external review.
Choosing the Right People for the Job
Audits and reviews must be performed by an independent, outside CPA.
Not every CPA firm is qualified to perform an audit or review. When the time comes for you to invest in an audit, you’ll need a firm who is experienced in your industry and understands your business. Although it could be the same firm who performs other services for your company, they must be able to maintain a position of independence throughout the audit.
It’s also important you feel confident they have a solid reputation, qualifications, and staffing to perform the audit efficiently. You need to ensure you’re ready for the process to begin, and avoid unnecessary, and often costly delays.
HKMP has the knowledge, experience, and reputation to ensure both audits and reviews are performed professionally, and efficiently. As such, they can advise you as to which process best serves your needs.