Accounting Outsourcing | What Is The Difference Between Notice To Reader And Audited Financial Statements
When business owners are required to get statements for their bank loans, often they are asked to get audited financial statements or notice to reader financial statements as accounting outsourcing. Many entrepreneurs donít know the difference between the two types of statements, therefore are unsure when itís appropriate for a bank to ask them for audited statements, and when a notice to reader financial statement will be acceptable.
One of the first things that an entrepreneur can understand when it comes to their financial statements, is the difference between a notice to reader and and audited financial statements. Accounting and outsourcing says that when an accountant is preparing a notice to reader statement, there main duty is to ensure that the numbers are arithmetically correct, and plausible. Other than ensuring that the balance balances, and that the numbers add up correctly, no additional testing is needed. When a chartered professional accountant is preparing audited financial statements, a lot more work must go into actually confirming the numbers are correct, often by going back to the bank and checking financial numbers directly with the source, as well as sending out statements to the customers to ensure that balances owing are actually still outstanding, and that they are going to be paying off those balances.
When an entrepreneur is getting a loan from a bank, often the banks request financial statements in order to grant the loan. Accounting outsourcing says that while banks are starting to only require notice to reader statements, some of them still are asking business owners for reviewed or audited financial statements. Itís often in the business ownerís best interest to get the notice to reader statements, especially when the bank also needs good interim statements. Itís more beneficial for the entrepreneur to get noticed reader statements, not only is it a lot more inexpensive and quicker, but an accountant will also be able to prepare notice to reader statements as well as good interim financial statements.
When the chartered professional accountants needs to prepare reviewed or audited financial statements as accounting outsourcing, thei main duty is to the bank, and not the business owner. Because of this, an accountant must remain impartial and objective, and if there preparing reviewed or audited statements, they are not able to remain impartial enough to prepare the interim statements. This is why itís often counterproductive for the business owner to get reviewed or audited financial statements in addition to interim statements when theyíre applying for a loan.
When business owners know the difference between a notice to reader statement as well as an audited statement, they will be able to navigate through getting a loan a lot easier, especially if a bank requests a reviewed or audited financial statement, and they are able to find out that it actually is not necessary, they can save themselves time, money, and continue using their own chartered professional accountants in order to prepare their statements to get there loan.
One of the reasons why a business owner would require getting any sort of financial statements, is if they are applying for loans with financial institutions as accounting outsourcing. Even though most banks are no longer requiring reviewed or audited financial statements, a lot of paperwork has not changed, which asks the business owner to have their chartered professional accountant prepare reviewed or audited financial statements. This can be difficult for business owners, and is often completely unnecessary.
When a business owner approaches their chartered professional accountant in order to prepare reviewed or audited financial statements, and accountant may ask what the reason a business owner requires that statement is. They often can approach the bank themselves, to help determine if a reviewed or audited financial statement is absolutely necessary. Often, a bank will be able to accept a notice to reader financial statement instead of an audit or reviewed statement when speaking to the chartered professional accountants.
In some instances, especially when it comes to nonprofits, accounting outsourcing says that Board of Directors often request those charities get reviewed or audited financial statements. This is also becoming less the norm, especially because the amount of time that goes into preparing the reviewed or audited financial statements is large. Most charities are small and arenít able to bear the financial burden of preparing these much more expensive statements, and nonprofits who have requirements in their charities documents stating that they need to prepare audited or reviewed financial statements may approach their Board of Directors to request those specifications be changed.
One reason why a client having to prepare a reviewed or audited financial statements when getting a loan is unreasonable says accounting and outsourcing, is because the accountant that prepares the reviewed or audited financial statements must remain impartial, and there main fiduciary duty is to the bank. Which means, if the bank also requires good interim financial statements, the accountant that is working on the reviewed or audited statements cannot do them. This means a business owner is forced to find the secondary chartered professional accountant who needs to provide the good interim statements. Accounting and outsourcing says that this is difficult, because an outside chartered professional accountant is not going to be able to know their books as well, and those interim statements are not going to be as complete as they would be if the business ownerís main chartered professional accountant was working on them.
Even though it used to be the norm for business owners who are getting any types of loans to require reviewed or audited financial statements as accounting outsourcing, most banks are relaxing those rules, and have seen several million dollars be loaned simply on the notice to reader financial statements. A business owner who has been requested by their bank to prepare reviewed or audited financial statements can either ask them why itís necessary, or ask their accountant to see if they can get a notice to reader statement instead.