Many lenders and most investors require financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP), which is a complex and ever changing framework of accounting standards, rules and procedures.

Financial statements are always issued by the company, and the company is primarily responsible for their content. Often, a report from a Certified Public Accountant firm acceptable to the lender or investor regarding the financial statements is also required.

There are three levels of reports that can be issued by CPA firms;

  • The compilation is the lowest level of report a CPA can provide for financial statements. The standard compilation report states that the CPA firm has "not audited or reviewed the accompanying financial statements and, accordingly, does not express an opinion or any other form of assurance on them."

  • The next level, known as a review, requires all of the procedures necessary for a compilation engagement, plus other procedures that enable the CPA firm to provide limited assurance on the financial statements.

  • An audit provides the highest level of assurance on the financial statements, because many important audit procedures are not required for compilations or reviews. The standard audit report states, "In our opinion, the financial statements present fairly, in all material respects, the financial position of {client company} as of {date}, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.”

Often lending institutions offer better pricing on loans when they are able to receive the assurance that GAAP compliant reviewed or audited financial statements provide. Most investors, such as private equity funds, require audited financial statements as a condition of their investment. If your company is contemplating a sale or merger, GAAP compliant reviewed or audited financial statements are essential to maximizing value.

Under today’s rules, CPA firms are not permitted to issue review or audit reports if they participate in a material manner in the preparation of the financial statements, or if they are not independent with respect to the company issuing the financial statements.

As your CFO On-Demand, we can prepare the financials you need to maximize the value of your business andminimize your cost of capital. We will also minimize your CPA firm fees to by providing the correct supporting documentation in the format needed to expedite their examination process.