Why you might need an audit of your financial statements

  • April 5, 2021
  • Marianne Lilly, CPA, CGMA, CFE

There are many benefits to having an audit of a company’s financial statements, especially for privately held businesses with revenue over $1,000,000.  An audit provides the highest level of assurance that a company’s financial statements are fairly stated (in all material respects).  This assurance is provided by an independent third party.  Audited financial statements in accordance with accounting principles generally accepted in the United States of America include accruals such as accounts receivable and accrued liabilities not included in certain tax basis financial statements. This gives interested parties a better idea of a company’s financial position.

Here are a few reasons business owners and managers come to ShindelRock for an audit of their financial statements:

  • Required disclosures provide detail and insight into a Company’s financial condition that may not be apparent from a balance sheet and income statement alone.  Provides clarity to all stakeholders, board members or other users.
  • Can help management and other parties meet their financial reporting responsibilities, especially knowing an independent party will be reviewing and testing the financial records.
  • An auditor must develop an understanding of an organization’s internal controls and access risk and thus may be able to identify control weaknesses, provide guidance on internal control improvements and recommend ways to reduce risk.
  • Auditors provide a unique perspective on the business and may be able to make process improvement and financial statement presentation recommendations.
  • A company may be better prepared to seek financing with audited financial statements.
  • Audited financial statements add credibility if a potential buyer requests financial statements.
  • A company may be better positioned to take the company public; if that is an option being considered, as internal control and financial issues would already be identified.
  • An audit increases the value and credibility of the financial statements produced by management, thus increasing user confidence in the financial statement,
  • Company can use the auditor’s report to promote accountability for the managers and employees in the company. Individual employees may focus more on dependable accounting and management if they know that the company is regularly audited.

Of course, there are many instances in which audited financial statements are required such as: certain debt requirements, board requirements and a long list of regulatory requirements. The above benefits of having an audit apply to these companies too.

Another option for companies not required to have an audit is to obtain reviewed financial statements.   We detail the difference between a review, compilation, and an audit here.

If you think your business may require an audit or would like the peace of mind that a financial statement audit brings, contact a member of the ShindelRock audit team.

2 thoughts on “Why you might need an audit of your financial statements”

  1. Warsidi says:

    Can you please explain why the financial statements with reported revenue over $1,000,000 merits the audits? What does the benchmark really means?

  2. Steve Wisinski CPA CFE MAFF says:

    The $1M mark is a general rule of thumb. Usually at this level of revenue and activity the business is established and the internal workings of the company complex enough that it becomes increasingly difficult for a business owner to have an intimate knowledge of every facet of their business. They are relying on others and the information provided by others. This article lists the possible benefits of having an audit.

    We have plenty of business who exceed this threshold who don’t get audits and their isn’t a need to. This is really just a mental sticky note to say, “Hey, let me think if it this might benefit the company.”

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