If you do the bookkeeping for your small business, growth can sometimes make assistance from a professional accountant or accounting firm necessary. Outside help may prove especially essential if you need professionally prepared or verified financial statements. Before signing any agreements, it’s important to understand the various services they offer, the differences between these services, and whether your small business needs these services or not.
Audits are a full review of your small business’ financial matters, and independent auditors from accounting firms confirm the validity of your data and check for possible material misstatements. To do this, auditors perform numerous tests and checks to ensure you appropriately enter and maintain your financial records. In addition, auditors determine if internal control lay the correct foundation for accurate financial reporting. As an end result, you get an overall opinion from auditors regarding the quality of your financial statements and recording and reporting practices.
Due to the extensive work that goes into an independent audit, this service runs more than lots of other professional accounting options. Keep in mind, though, that public companies require a professional audit performed in accordance with a specific accounting framework as do some companies seeking external financing. If you have a small business in a highly specialized industry, you may find your options limited in who can audit certain portions of your financial statements, which can drive up audit costs further due to the skill level you require.
Accounting firms can also perform reviews, which result in partial assurance from the accounting firm that your financial statements have no material misstatements. Keep in mind, though, that these review engagements provide less assurance because they perform less testing. An accounting firm doesn’t do as many tests, doesn’t test as many transactions and doesn’t cover all the areas of consideration it does when it performs an audit. The accounting firm tests the reasonableness of the figures you report, reviews management’s responsibilities and performs analytical procedures to test the relationships between financial figures.
Because a review requires less work, it proves less expensive, but it also doesn’t offer as much assurance of the validity of your business’ information to external users. Despite this, many financial institutions and external investors still accept reviewed financial statement data.
Financial statement compilations comprise the most basic offering from accounting firms. This process involves building financial reports and producing a final product that your small business can present to external users. Be aware that it doesn’t deliver quality assurance when it comes to the underlying numbers. It only develops the report itself based on the numbers you give the accounting firm.
Though compilations prove less expensive than audits and reviews, they don’t provide any assurances as to the accuracy of your financial data. Compiled financial statements generate reports you can distribute, but financiers often require some level of assurance. Additionally, compilations offer flexible service options with different levels available, and they don’t require an independent accounting firm.
While you may find you need a professional accountant down the road, for many small businesses, accounting software that helps them better record data, track revenue and expenses, and create financial reports fills the bill. QuickBooks Online does all this and much more, and 5.6 million customers use this app to help them manage their finances. Join them today to help your business thrive for free.