In the world of CPAs, when it comes to financial statements, there are four primary levels of service: preparation, compilation, review, and audit.
Each type of financial statement comes with a different level of “assurance.” This assurance ranges in scale from none at the low end to “reasonable assurance” at the high end. Each type of financial statement involves a different level of effort--and a different price.
The Winery CPA only provides the first level of service - prepared financial statements
What is a prepared financial statement?
A prepared financial statement is basically what it sounds like. In this type of engagement, the CPA is working with you as the business owner to prepare financial statements, generally for internal use in making management decisions. The CPA in this case is doing the same sort of work that an in-house controller or CFO might do.
The CPA will include a disclaimer with these statements that no assurance is provided. No other formal report is required and the CPA generally does not include any disclosures, such as are required for statements with a higher level of assurance. The CPA is not required to be independent in order to provide prepared financial statements.
The letter of engagement that you sign with us covers the bases for prepared financial statements. Our agreement with you is that we provide financial statements, in accordance with SSARS 21 and with the professional standards of the AICPA, based on information provided by you. We do not verify the accuracy or the completeness of the information you provide to us, nor do we otherwise gather evidence “for the purposes of expressing an opinion or a conclusion” on the accuracy of the financial statements.
Can’t I just print my reports from QuickBooks?
Of course. These would be considered self-prepared statements. Often lenders will accept these as long as the owner signs their name to them.
What if I need reviewed or audited financial statements?
A prepared financial statement should be generally acceptable to your lender if you are looking for a new loan or trying to refinance a loan. It is one step above “self-prepared” financial statements.
In some cases, a higher level of assurance will be required by your lender (or some other third party) and they will request a compiled, reviewed, or audited financial statement. Each of these provides a higher level of review and investigation to verify the accuracy and completeness of the statements. If this is your situation, we will happily refer you to another firm who can provide compiled, reviewed, or audited financial statements for your business and work directly with that firm to make sure they have all the information they need.
