It’s critically important for all businesses to retain a CPA firm that will perform auditing and other services on the company’s financial statements. The CPA’s work can help your firm uncover weaknesses in your business operations that expose your assets to theft or loss. Many stakeholders rely on the accuracy of your financial statements, so it’s important to have a CPA firm analyze your records.
Communication with stakeholders
A stakeholder is broadly defined as an entity that has an interest in the success of your business. Your investors, creditors, and suppliers may need to review your financial statements to assess how your business is performing:
- Investors: An investor who buys common stock in your business is putting capital at risk in exchange for a potential increase in the value of your company and a higher stock price. While you may provide press releases and other information to shareholders, your most reliable form of communication is a set of financial statements that is audited or reviewed by a CPA firm.
- Creditors: If your company has a line of credit or some other loan outstanding, your lender will review your financials to determine if the business is generating enough profits and cash flow to repay a loan on time.
- Suppliers: Your business may generate a large amount of revenue and profit for a supplier. If your sales and profits are declining, you may reduce your production, which has an impact on your suppliers. Suppliers that are concerned about the viability of an important customer may review your financial statements.
To meet the needs of your stakeholders, find a CPA firm that provides auditing and assurance services to businesses in your industry.
Audits, reviews, and compilations
An audit is a CPA firm’s opinion as to whether or not your financial statements are free of material misstatement. In this case, the word “material” refers to a dollar amount that is large enough to impact the opinion of the financial statement reader. When an audit is performed, the CPA provides a written opinion regarding the financial statements.
CPA firms provide other services, such as reviews, compilations, and agreed-upon procedures. These engagements require less work by the CPA firm and the CPA does not provide an opinion on the financial statements. Work with your accounting firm to decide which type of engagement meets the needs of your stakeholders.
Preventing fraud and theft
When CPAs perform tests on your accounting records, they can uncover weaknesses in internal controls. These are the controls you put in place to protect assets from theft and to authorize the use of assets in the business. It’s important to apply the segregation of duties concept to your internal controls.
Segregation of duties means that a business separates key responsibilities between different employees. When dealing with cash, for example, the individual with custody of the checkbook should be different from the person who authorizes payments. A third person, possibly the owner, should be responsible for reviewing all documentation and signing a company check. A CPA firm can assess your firm’s internal controls and make suggestions to improve company operations.
Work with an accounting firm that can provide these critical services for your business. A CPA firm can help you produce accurate financial statements and analyze your internal controls.