Audits, Reviews and Compilations
Every organization may at times, need to report how the organization is doing financially or provide assurance on some financial or non-financial data to outside entities. Stockholders, creditors, and private investors require assurance that the financial statements accurately represent the true financial position of a company yet their tolerance of risk may be different. Jagpat & Associates, CPA provides three levels of assurance to meet your needs.
AUDIT – HIGHEST LEVEL OF ASSURANCE
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.
An audit allows you to:
- Satisfy stakeholders such as employees, customers, suppliers, and pressure groups, as well as the investing community; as to the credibility of published information.
- Facilitate the payment of corporate tax, goods and services tax, and other taxes on-time and accurately, thereby avoiding interest, penalties, and investigations.
- Comply with banking covenants.
- Help deter and detect material fraud and error.
- Facilitate the purchase and sale of businesses.
Jagpat & Associates also performs physical inspections by observing your inventory counting methods and 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.
REVIEW – LIMITED ASSURANCE
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 doesn’t require us to study and evaluate your company’s internal controls, or verify data with third parties, or physically inspect assets. 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 – LOWEST LEVEL OF ASSURANCE
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. A compilation can also benefit your company by assisting with any year-end adjustments that need to be made to more accurately reflect the company’s financial position and results of operations.
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. After Jagpat & Associates performs any of the procedures outlined below, your company will be furnished with a management letter or report from our firm that details our findings and recommendations. These services are more fully explained as follows:
Performing agreed-upon procedures is a process of applying specific procedures to an area of a financial statement or within a specific accounting cycle. When agreed-upon procedures are requested, a member of our team will meet with you to determine what specific goals you are trying to accomplish and the procedures that will help achieve those goals. They are then performed to provide management with an opinion regarding the fairness of information presented.
Analytical Procedures/Ratio Analysis:
Analytical procedures and ratio analysis is a financial analysis of the company, which discloses trends concerning the company’s:
- Financial stability
- Ability to meet its current obligations
The services are based upon comparisons with prior years as well as with similar companies within your industry. The information provided in an analytical procedures and ratio analysis will assist management in focusing on financial strengths and weaknesses, as well as provide another way to interpret current financial information.
Comprehensive financial projections are usually necessary when seeking financing to expand, develop or purchase a new product line, obtain a new building, or for major equipment additions. We will work with your key personnel to develop a financial projection that will be reasonable based upon the underlying facts and assumptions, and that will answer the questions a bank or a potential investor may have.
It’s easy to understand why management and boards need assurance on the reliability of the financial information they report to stakeholders. Obtaining that assurance requires a firm that can achieve the highest levels of quality and insight in the audit while providing an enlightened perspective on your business.