You know that timely, accurate and understandable financial statements are necessary to gauge how well your business has performed and to assess the strength of its financial position.  You know that they are the foundation upon which you make important business decisions.

 

​You can  prepare your financial statements in house, but it you're like many small business owners, you may prefer to have an outside professional to prepare your financial statements in accordance with an accounting framework that is appropriate for your business.

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Oftentimes, the certified public accountant (CPA) who performs your general accounting and/or bookkeeping and prepares your annual tax return can also prepare your financial statements and, in addition, perform the appropriate service in order to meet your bank's requirements. Keep in mind that not all accountants are CPAs. In most states, only a licensed CPA can perform certain services.

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UNDERSTANDING ASSURANCE

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A CPA can obtain a level of "assurance" about whether the financial statements are in accordance with the financial reporting framework. The CPA obtains assurance by obtaining evidence. There are different level of assurance that a CPA can obtain that can range from no assurance at all, to the highest level of assurance, which is an audit. The level of assurance required by lenders is typically based on the size of the loan, the collateral and their determination of the overall risk.

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Other situations that often require a level of CPA assurance include performance bonding and leasing. Certain trade creditors, outside investors or family owners that are not actively involved in the business may also request or require a level of assurance on your financial statements. If your requirements are unclear, in many cases, your CPA can speak with your lender and others about the level of service that will satisfy their requirements.

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