Private Company Audit Services: Choose the Right One

Private company audit services include financial statement audits (also called audited financials,) compilations and reviews.

If you’ve received a request for an audit from a lender, investor, or regulator, first you’ll want to determine if you need a full financial statement audit, or if a less expensive compilation or review will do. The answer often depends on who’s asking for an audit.

You want to work with a CPA audit firm that:

• Will be honest with you about the type of private company audit you need, not just sell you on the most expensive audit service
• Is registered with the Public Company Accounting Oversight Board (PCAOB)
• Is peer-reviewed by an independent CPA audit firm on a regular basis
• Has years of experience providing private company audit services
• Uses CPAs and senior auditors to complete your audit, not junior staff

Request a FREE quote on your audit service. We’ll help you determine if your company needs full audited financials, or if a compilation or review would meet your requirements and help you save money. Clarity Tax & CPAs have been providing professional audit services to businesses since 1976.

Do You Actually Need an Audit? Audit vs Review vs Compilation

Audit requirements for private companies vary. If your state requires audited financials, you may need a full audit. If not, you may want a less comprehensive audit service, like a compilation or review, that takes less time to complete, and costs less than a financial statement audit.

Private companies often use compilations to apply for small loans or submit simple regulatory filings. You don’t need a CPA to submit an objective opinion on a compilation, or do testing or review internal controls, so compilations cost much less than full financial statement audits.

If your state doesn’t require audited financials, but you want more than a simple compilation, you could also choose a review. Reviews cost more than compilations, but less than financial statement audits.

Of the three options, audits provide the highest level of assurance. Audits are a great way to reassure your stakeholders about the state of your company’s finances.

Audits Include:

• Confirmations
• A Materiality Assessment
• Transaction Testing
• An Evaluation of Your Internal Controls
• The Auditor’s Opinion (level of assurance)

We won’t try to sell you an audit if you don’t need one. We look at who’s requesting the audit, and help you determine which service you need.

When Private Companies Need an Audit

Private company audits may be needed:

• To comply with state law
• At the request of a lender or investor
• At the request of the business owner
• At the request of your shareholders or partners
• To comply with federal regulations for your industry
• When you are buying or selling a private company

Lenders, Investors and Regulators Often Request Financial Statement Audits

This is the most common scenario for a private company audit. Lenders want to see how you process financial transactions, what internal controls you have in place to prevent and detect fraud, and the general state of your finances before they loan your company money.

Audits Can Protect You When Buying or Selling Your Private Company

Providing audited financials is part of due diligence when you’re buying or selling a business. It suggests whether the business is worth its asking price. It can also provide transparency and protect both parties to the sale.

Reassure Your Partners and Shareholders with an Assurance Service

When co-owners disagree about company finances, they may request an audit to settle their dispute. Your CPA audit firm acts as a neutral third-party without any conflicts of interest, and will review your company’s books to create a financial statement. Shareholders often seek the same reassurance about their investment in your company.

Owners May Want an Independent Second Opinion from an Impartial CPA Audit Firm

Similar to partners engaged in a dispute, your company founder/owner may want independent verification that your books are accurate, especially if they’re considering major changes, like a significant expansion.

Why You Want Clarity Tax & CPAs to Do Your Audit

You don’t want to pay more than you have to for an audit. You need someone who will be an honest partner and tell you the truth.

Plenty of CPA audit firms will happily sell you a full audit, whether you need it or not. They’ll often sell you the most expensive assurance service they offer, and you’ll never know you could have gotten a better deal.

Here’s an example:

Your company receives a request for a “PCAOB audit.” But you may not need a PCAOB audit. You probably just need an audit from a CPA firm that’s registered with the PCAOB.

Many CPA firms will sell you that PCAOB audit and not think twice about it. We’ll actually find out which type of audit you need, and provide the one that meets your requirements without selling you more than what you need. If a less-costly review or compilation will get the job done, we’ll tell you.

The difference in cost between a PCAOB audit and a standard GAAS audit completed by a PCAOB-registered CPA firm? Thousands of dollars.

You want to work with Clarity. Here are three more reasons why:

• We believe in the power of peer reviews. That means we have another CPA firm review our audit process every 18 months, and give us their opinion, including any areas where we can improve. CPA audit firms aren’t required to do peer reviews. But we believe in maintaining a higher standard, and peer reviews are an important part of that.
• We don’t pass your audits onto junior staff. Our senior auditors complete all of our assurance services, including financial statement audits for private companies. You want audit specialists doing your financial statements, not bookkeepers or seasonal tax preparers who do a few audits on the side. The audit mindset is completely different than tax preparation. You don’t want an auditor with a split focus. You want one that lives and breathes audits, not taxes.
• You can receive a request for an audit at any time of year. Unlike many audit firms, we stay open year-round, not just at tax time. We’re here for you when you need us.

What to Expect: Our Private Company Audit Process

We know your company audit can be stressful, so we’ve created a straightforward process to help it go as smoothly as possible.

Step 1: Your Audit Scope and Needs Assessment

First, we determine which audit and assurance services you need, whether that’s a financial statement audit (audited financials), a compilation, or review. We’ll ask you questions on our initial scoping call to learn more about your company, and how simple or complex your business is.

Step 2: Are Your Books Clean and Audit-Ready?

We’ll assess your books to see if they’re clean and up-to-date. That includes all of your bank, credit card and loan accounts. We’ll look to see if you’ve reconciled all of your monthly statements.

If you need bookkeeping services to get your books audit-ready, we can provide that for you. Starting out with clean books is the secret to a good audit.

Step 3: Audit Fieldwork and Testing Begins

Once your books are ready, we use them to decide what to test. We’re looking at your internal processes, including how you record and categorize your financial transactions. The focus is not just on the processes you have in writing, but how consistently you follow them.

Step 4: Your Private Company Audit Report and Opinion Are Ready

Private company audit reports are usually ready about 6-8 weeks after we begin. If your books are clean and audit-ready, your audit may be ready even sooner.

Other than clean books, the best way to speed up your audit timeline is to establish a single point of contact at your company to respond to your auditor when they request more information. Try to respond within one business day to keep the audit ball rolling.

Private Company Audit Services Fees

We’ll provide a quote for your audit up front, before we start working on it, so there are no surprises.

Your audit cost is based on the following factors:

• The number of staff hours needed to complete your audit, compilation or review
• The type of audit staff you need (senior auditor or partner). We can determine this up front, based on the complexity and size of your business
• The type of assurance service you need. Compilations require the fewest hours, and don’t require partner involvement, so they cost less than reviews and financial statement audits. Reviews take about 40% more hours to complete than compilations, and full audited financials require the greatest number of hours. We’ll let you know if you need a full audit, or if a compilation or review is enough to meet your requirements (and help you save money.)

Private Company Audits: Frequently Asked Questions

How long does a private company audit take?

Private company audits take about 6-8 weeks to complete, on average. If you start the audit process with clean books and respond quickly to your auditor’s requests, you can save a lot of time.

What is the difference between an audit, a review, and a compilation?

The difference between an audit, review and compilation lies in the different levels of assurance they provide. Assurance refers to the level of confidence in the audit. A full financial statement audit (also called audited financials) includes an objective opinion by a CPA. This is the highest level of assurance.

Compilations are financial statements created by your company’s own data, but without any testing or opinion. Reviews are slightly more comprehensive, but still provide lower assurance than an audit. Compilations and reviews generally cost less, and take less time to complete. If you aren’t required to have full audited financials, doing a compilation or review instead can save you a lot of money and time.

Do I need a PCAOB audit or a standard audit?

You need an audit completed by a PCAOB-registered CPA audit firm, in most cases. If you receive a request for a PCAOB audit, we’ll help you determine if you actually need one, or if you just need a standard financial statement audit completed by a firm registered with the PCAOB.

The difference in these two types of audits can be in the thousands of dollars. We won’t sell you the more expensive audit if you don’t need it. That’s the Clarity difference.

What do I need to prepare before the audit starts?

Preparing for an audit is much easier, once you review our audit readiness checklist. It contains a complete list of the financial documents you need. And we’ll be there to help you, every step of the way.