Accounting Outsourcing | When Audited Financial Statements Are Necessary
When business owners come into their accountantís office, they believe they need an audit or a reviewed financial statement but donít know why says accounting outsourcing. There are many reasons why business owners may require an audit or an audited financial review, but most of the time entrepreneurs can get a notice to reader statement instead of the expensive audits or reviews.
The difference between notice to reader statements, reviewed financial statements and audited financial statements are quite great. The notice to reader statements are arithmetically correct and plausible, but are virtually untested. The reviewed financial statements, the accountant will test the reasonability of the statements using a variety of testing methods, while audited financial statements have actually been confirmed by the accountant as correct by utilizing bank statements and customer records. Accounting outsourcing says because of the time involved in checking, the audited financial review is the most expensive, while the notice to reader which is arithmetically correct, is the least expensive because it takes the least amount of time to produce.
When accountants are completing reviewed or audited financial statements, their fiduciary duty is actually to the banks, or the Board of Directors and not the clients says accounting and outsourcing. Business owners are going to want to ensure that when they request a reviewed or an audited financial statement that they understand that the accountant will be working at an arms length from them, because they need to remain impartial during the process. This is actually why notice to reader statements are actually more beneficial to clients. Accounting outsourcing says that because an accountant will be able to provide feedback to the entrepreneur, and help them out a lot more than if they were providing be reviewed or audited financial statements, is often in the ownerís best interest to get notice to reader statements.
Since notice to reader statements are beneficial to the client, many business owners would question why anyone would choose an audit or a reviewed financial statement asks accounting and outsourcing. Often an entrepreneur will require a reviewed or and audited financial statements because they need to borrow a significant sum of money. Not for profits also often have to get a reviewed or audited financial statement because they have to satisfy a Board of Directors. But for the most part, small businesses only require the notice to reader statements.
Even though when entrepreneurs are applying for loans, they sometimes require reviewed or audited financial statements says accounting outsourcing, but more and more these days itís becoming the norm for banks to loan large sums of money to business owners based only on the notice to reader statements so any time a bank requests financial statements more than notice to reader, entrepreneurs should question why.
Accounting and outsourcing says thereís several instances where business owners might require reviewed financial statements or audited financial statements, but entrepreneurs should always question if thatís absolutely necessary, so that they can obtain a notice to reader statement at a much smaller cost to them, and be able to get the help of an accountant as well.
Since 50% of all entrepreneurs close the doors to their business within five years says accounting outsourcing, 29% of those entrepreneurs say that the main reason why their business failed was because they ran out of money. Helping business owners avoid running out of money can help them significantly in their business and one way that they can do that, is by utilizing notice to reader statements instead of audits or reviewed financial statements.
One of the reasons why many business owners believe that they need reviewed financial statements or audited financial statements is because it used to be what business owners required in order to all fine for loans says accounting and outsourcing. This is no longer the case, there is very few instances where business owners actually need reviewed or audited financial statements. Often, not for profits require reviewed or audited financial statements but accounting outsourcing says that this is actually often counterproductive because the scope of providing an audit is very large, and many non-for profits donít have a large budget. Requiring nonprofits to have to pay for audits or financial reviews can be counterproductive because it would prohibit them from spending a significant amount of their budget on their cause. Audited reviews may sound like they are a good idea, but charities that are small should double check with their accountant and their board if itís actually mandatory.
Because audited or reviewed financial statements are required less and less these days, accounting and outsourcing suggests that any business owner that has been told by their bank that they require them should question that. Since banks have been relaxing their positions on finding to entrepreneurs based on notice to reader financial statements, business owners often think that they still require them, and many banks havenít updated their paperwork to show that they donít need it. If the bank states that they require an audited array reviewed financial statement, an entrepreneur should ask them to double check that.
If entrepreneurs find out that they still do need a review or an audit, a business owner should ensure that there talking to their accountant to get some professional advice. Accounting outsourcing says that while business owners are in the process of getting there reviewed or audited financial statement, the bank may still require they get good interim statement, which can sometimes mean the accountant that is working on the reviewed or financial statement isnít able to help, because they wouldnít be able to remain impartial, so some times business owners may get around this by hiring to chartered professional accountants to work on their file to get the good and reliable interim statements that they need, while their regular accountant is working on their audited or reviewed financial statements.
While notice to reader statements are quickly becoming the standard for business owners who are applying for loans, they still should do their due diligence to ensure that that is what they require, so they donít have to end up spending large amounts of money on audits or reviewed financial statements.