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Stockholders, creditors, and private investors often need assurance that the financial statements accurately represent the true financial position of a company. At Morey, Nee, Buck & Oswald, our accounting professionals will conduct audits, reviews, and compilations to provide those assurances. Audit 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.
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 order audits as checks of their management teams. 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 Are 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. Beginning with the 2009 plan year, organizations subject to ERISA will generally be required to have their 403(b) plans' financial statements audited, if they have more than 100 eligible participants as of the beginning of the plan year. These audited financial statements will be a required attachment to the plan's Form 5500.
Beginning of the year - The determination as to if an audit is required is determined on the first day of the plan year Form 5500 is required for calendar year 2009 plans as well as fiscal year plans that begin in 2009 Review 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 In compiling financial statements for a client, we present information that is the "representation of management" and expresses no opinion or assurance on the statements. Compilations don't 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.
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