See Also:
How to Control Audit Fees
How to Hire a CFO Controller
American Institute of Certified Public Accountants - AICPA
How to Control Annual Audit Fees
How to create dynamic cash flow projectionsCHOOSING AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT/AUDITOR
Any company whose stock is sold to the public is subject to the reporting requirements of the Securities & Exchange Commission, which include having its financial statements audited by an independent certified public accountant. Companies, whose stock is not sold to the public, are not subject to such reporting requirements, but many such companies have an annual audit of their financial statements performed because one may be required by:
• Debt covenants
• Shareholders/partners agreements
• Government or other contract agreements
Owners may require one to satisfy themselves that the data provided by the company’s financial staff is “materially correct.”
It should be understood that an audit does not guarantee that the financial statements are 100 percent “correct” but rather that they are “materially correct and not misleading.” Also, the audit is not intended to detect fraud.
Selecting an auditor (CPA) is an important task for a company, as the CPA can be a valuable resource for information, and such relationships generally last for years. The 4 largest international (Big 4) certified public accounting firms, are rarely used by privately-owned companies, particularly if the company revenues are under $100 million, because of the fees commanded by these firms who perform most of the audits of the world’s publicy-owned companies. Factors to be considered when choosing from the remaining firms include:
• The nature of the company’s operations - multi-national, multi-state, or multi-location within a state
• Company plans for expansion, potential future debt placements, and IPOs
• Experience of the CPA in company’s industry, particularly that of the local office staff’s experience
• Size of CPA and its impact on ability of CPA to meet company reporting requirements, such as timetables and contractual deadlines
• Compatibility of CPA staff with company culture
• CPA’s reputation within the local business community, particularly the company’s bankers, trade creditors, or other debt holders
• References from existing and former clients
• Potential for year-to-year stability of staff assigned to your account
• Tax experience in company’s industry
• Composition of CPA’s staff to be assigned to account
• Distribution of CPA's business – audits, write-up, tax
• Willingness of CPA to utilize company staff to minimize annual audit and tax return preparation fees
• Audit fee to be charged
Keep in mind that Bigger does not necessarily mean BETTER SERVICE for your company.