Accounting and Review Services by CPAs

A small business may not be able to afford an audit. The cost of an audit could be more than the total annual interest expense on the debt of a smaller business, for instance. Bankers and other sources of loans to business understand this, so they generally do not insist on audits. However, they may want a CPA to at least look over the financial reports of companies they loan money to; or, they may make clear to their small-business customers that they would be more comfortable if the businesses used a CPA to advise them on their financial statements.

A CPA can perform certain limited procedures which are called a review. A review is far less than a full-scale audit. But a review provides enough evidence about the company's financial statements so that the CPA can go on record that he or she is not aware of any modifications (changes) that are needed to make the financial statements conform with generally accepted accounting principles.

The CPA warns the financial report readers that a review is substantially less than an audit and that, accordingly, no opinion is being expressed on the company's financial statements. Based on a review the CPA does not give an affirmative opinion but rather a negative assurance ("no modifications are needed . . . "). This negative assurance may be sufficient to satisfy lenders or investors in the business.

Many smaller businesses need the help of a CPA to prepare their financial statements. A CPA comes in and from the company's accounting records (which may need some adjustments) the CPA prepares the company's financial statements. In this situation the CPA is said to compile the financial statements. No audit and no review is done. So, the CPA must disclaim any opinion on the financial statements; and, no negative assurance may be given.

Most smaller businesses use CPAs to prepare their income tax returns and to advise them on how to minimize their income taxes. Also, they turn to CPAs for a wide variety of advice—for example, recommendations on accounting software.

Accounting Methods and Quality of Earnings

The Force Of Fulcrums

The Force Of Fulcrums

Learning About The Force Of Fulcrums Can Have Amazing Benefits For Your Life And Success! How simple shifts in your thinking will make you rich forever! If you wish to grow beyond your current state of being, you'll need to learn about the fulcrum precept. A fulcrum is the pivot point for a lever. Therefore, whenever you wish to properly utilize leverage, then, you'll need to place the fulcrum in the right place. Many people have never heard if this and have no idea how to go about figuring out where they are or how to change it.

Get My Free Ebook


Post a comment