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DO YOU
KNOW WHAT YOUR BUSINESS NEEDS? Requirements can be
determined in bank financing agreements, in a Common Interest Community
(CIC) Association governing documents and/or State Statute; or a
company’s Board of Directors may desire to have financial reporting
services done by a CPA: 1.
Audit 2.
Review 3.
Compilation Tax return preparation Other annual filings 1.
Audit o
An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures o
The auditor will follow
Generally Accepted Auditing Standards (GAAS) o
That the financial
statements are presented fairly, in all material respects o
That the financial
statements conform with general accepted accounting principles (GAAP) o
The CPA expresses an
opinion o
The CPA must be
independent – a CPA who has a direct interest in the company may not be
independent, for example: a CPA who owns a CIC unit is not independent o
Although audits are
commonly for a one year period the same as the tax year, an audit may
be prepared for a period of time longer or shorter than one year 2.
Review o Less in scope than an
audit o Consists of inquiries of board
of directors, management, and CIC personnel, and analytical procedures o The reviewer will follow
Statements on Standards for Accounting and Review Services o The CPA provides limited
assurance that they are not aware of any material modifications that should
be made for the financial statements to conform with GAAP o The
CPA must be independent – a CPA who has a direct interest in the
company may not be independent, for example: a CPA who owns a CIC unit
is not independent o Although
reviews are commonly for a one year period the same as the tax year, a
review may be prepared for a period of time longer or shorter than one
year 3.
Compilation o A
compilation is a good tool to prepare the tax returns and to use for
budgeting o Presents
your information in the form of financial statements Business Owners and Board of
Directors Members can benefit from these financial reports because: ü
Financial condition can
best be presented in audited, reviewed, or compiled financial
statements. ü
These financial statements
will include a balance sheet, statement of revenues and expenses, a
statement of cash flows and footnotes. ü
If the organization is a
Common Interest Community Association, the financial statements are
presented using the fund method of accounting, as recommended by the
America Institute of Certified Public Accountants, such financial
statements will include information on the operating fund and
replacement fund activities, including a statement of changes in fund
balances. Use of the funds
method of accounting for annual financial statements is a requirement
of the Minnesota Common Interest Ownership Act. ü
CIC financial statements
may also include supplementary information about future major repairs
and replacements. ü
As potential issues are
noted during our work we will make you aware of them and make
suggestions for remedies. NOTE: Board members should be attentive to
the information on the financial reports and annual reports, because
bankers and other credit providers, prospective unit buyers, and
internal managers and decision makers may be relying on the financial
reports need to get an accurate picture of the business’ financial
position. Financial reporting (Attest services): If
you are a business owner negotiating favorable credit terms with lenders,
would a review or audit be a good investment? Association
Board of Directors, can we help you meet your fiduciary responsibility
for any financial reporting requirements outlined in your governing
documents or under State Statute? |
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