Financial Statement Audits

Financial Statement Audits Completed by Senior Auditors

Financial statement audits are performed by our senior auditors, never junior staff. We can help you determine which type of audit you need and keep you from overpaying for any services you DON’T need.

Financial Statement Audit Services

Financial statement audits involve an objective third-party professional like a CPA examining your financial records (balance sheet, income statement, cash flow, etc.) and verifying their accuracy, completeness, and compliance with relevant accounting standards like GAAS (Generally Accepted Auditing Standards) as defined by the PCAOB (Public Company Accounting Oversight Board.)

Audits also identify any weaknesses or deficiencies that could lead to accounting errors or make it difficult for you to prevent or quickly detect fraud.

Financial statement audits are different from IRS tax audits, in which the IRS reviews your financial records to confirm you have paid the correct amount in taxes based on your income.

They’re also different from internal audits, which are primarily used for operational purposes.

They’re also not the same as SOC (System and Organization Controls) audits, which focus more on security, privacy and confidentiality issues.

Why You May Need a Financial Statement Audit

Financial statement audits are used for several reasons: to meet regulatory requirements, to reassure investors and lenders that your business or nonprofit is financially sound, and to provide an in-depth look at your ability to prevent and detect fraud within a reasonable amount of time.

Lenders, investors, and grantors often request audited financials. Regulators may also require you to submit an audit, especially if you operate a nonprofit meeting the $1 million threshold for federal fund expenditures, which requires a specific type of audit called a single audit.

You may also need audited financials if you are:

• Buying or selling a business (due diligence audits reassure buyers and provide sellers with higher valuations)
• Navigating shareholder disputes
• Need an objective opinion to provide co-owners who disagree about the numbers
• Provide founders with peace of mind
• Prior to scaling, fundraising or making major decisions

PCAOB Audit vs. GAAS Audit by a PCAOB-Registered CPA Firm

PCAOB audits are frequently sold to companies who do NOT need them.

At Clarity Tax, we don’t think you should pay more for something you don’t need.

There are PCAOB audits (rarely needed) and there are GAAS audits performed by PCAOB-registered firms. They are NOT the same thing, and one costs 4-5 times as much as the other.

Most firms don’t need an actual PCAOB audit, even if you received a request for one.

We can help you determine whether you need a PCAOB audit, or if a simpler service would be enough. Schedule a FREE 15-minute consultation. It could save you thousands.

The Best Way to Start Your Audit

Great audits start with clean books. It’s so important we’ll often ask our bookkeepers to clean up your books in preparation for the audit itself. During a financial statement audit, we’re asked to provide an opinion on the financial state of your organization based on a sample review of your records.

If your books are messy and disorganized, we can’t provide a positive opinion. That’s why we may recommend a cleanup first, if you need it. If your books are already in good shape, we can proceed right to the audit.

Why Work With Us?

Financial statements are one of the best ways to demonstrate the value of your business to lenders, investors and regulators. And they’re a must if you’re a nonprofit receiving federal grant funds.

We want you to be confident in the audit services you receive. That’s why we adhere to the highest standards for customer satisfaction and quality for our audits, including:

• Registration with the PCAOB (Public Company Accounting Oversight Board)
• Periodic peer reviews completed every 18 months (most recent opinion available upon request)
• Recommendations for only the audit service you need, not just the most expensive one. No one should overpay for an audit. We’ll help you determine if you need full audited financials, or if a simpler review or compilation will suffice.
• Audits performed by senior auditors, never junior staff. Many CPA firms give the assurance work to their junior auditors. We don’t.
• Same-day responsiveness year-round. Many CPA firms close for their off-season once tax time is over, but we stay open so you can reach us whenever you need us, with no wait.

Your Financial Statement Audit Process: What to Expect

Financial statement audits can be intimidating, especially if you’ve never completed one before We’re there for you every step of the way, to guide you and let you know what’s coming.

Here’s a typical audit schedule:

1. First, we have a quick call to learn more about your business and your needs. After the call, we’ll give you a FREE quote and our recommendations for the type of audit service you need - either a compilation, a review, or full audited financials.
2. Next, we’ll send you an engagement letter with a FREE quote so there are no surprises about the audit cost.
3. After you engage our firm, we’ll complete a pre-audit readiness review (books check). That gives us an idea of how audit-ready your books are, and whether we need to help you clean them up before we proceed with the audit.
4. Next, it’s time for a risk assessment and planning
5. Fieldwork begins. We’ll provide a list of everything we need from you. The amount of time it takes to complete this phase is largely based on how quickly you can provide the information we request.
6. Most audited financials are completed within 6-8 weeks, but could be as fast as 4 weeks if you have clean books and respond quickly to our requests for information. Compilations typically take 1-3 weeks, and reviews about 3-5 weeks.
7. We’ll then reveal any findings and submit our report.
8. Finally, we provide a post-audit debrief that shows you what to fix before next year.

Frequently Asked Questions about Financial Statement Audits

What is a financial statement audit?

Also commonly called “audited financials,” a financial statement audit is a specific financial report usually requested by a lender, investor or regulator. It means an objective third-party professional like a CPA firm examines your financial records (including cash flow, balance sheet, income statement, etc.) and verified their accuracy, completeness, and compliance with specific accounting standards like GAAS (Generally Accepted Auditing Standards) as defined by the PCAOB (Public Company Accounting Oversight Board.)

This opinion is not a 100% guarantee, since auditors only review a sample of your records, not all of them, and may not be able to detect all instances of deliberate misstatements (fraud.)

Audits provide a detailed look into your company’s finances and identify any weaknesses or deficiencies in your process that could raise your risk of accounting errors and/or make it difficult for you to prevent or quickly detect fraud if/when it occurs.

Financial statement audits are different from IRS tax audits. IRS tax audits occur when the IRS questions the accuracy of your income tax return and reviews your financial records to confirm you paid the correct amount in taxes.

Audited financials also differ from internal audits, which are often used for operational purposes, not for lenders, investors or regulators.

They’re also different from SOC (System and Organization Controls) audits that are primarily concerned with security, privacy and confidentiality issues.

Do I need a PCAOB-registered firm?

You might. The person requesting an audit may ask for a “PCAOB audit,” but in most cases, you don’t need a PCAOB audit, only a financial statement audit from an accounting firm registered with the Public Company Accounting Oversight Board (PCAOB.) Schedule a quick FREE consultation with us to determine which type of audit you need, and which is the most cost-efficient to meet your needs.

How much does a business audit cost?

Business audits of all types, included audited financial statements, compilations, reviews and single audits, are all priced based on the following:

• The number of staff hours required to complete your assurance service
• The type of audit staff you need (senior auditor, partner, etc.) based on the complexity of your business

The simplest type of audit service, a compilation, requires fewer staff hours than reviews and financial statement audits. Compilations also don’t require partner engagement, so they naturally cost less. Call us for a FREE consultation to determine if you need full audited financials or if a compilation or review is enough.

How long does an audit take?

Some audits take longer than others, but how long it takes is largely based on the complexity of your business and even more importantly, how quickly you respond to our requests for information.

If you already have clean books and don’t require any bookkeeping services prior to the audit, your audit could be done fairly quickly.

Here’s the typical timeline:

• Compilations: typically 1-3 weeks
• Reviews: typically 3-5 weeks
• Audits: typically 6-8 weeks, but as quickly as 4 weeks if you have clean books and respond quickly to requests for information