Denny & Company’s Matt Denny, a Santa Clarita CPA, explained that most people don’t like the word “audit,” because “usually it’s something that’s done to you by a government to find out whether you’re cheating them.” However, said Denny, there are other reasons a company might request an audit.
While Denny & Company does help businesses prepare for government audits, they also help companies with audits intended to show a third party’s assessment of their financial status when courting investors, seeking bank loans or representing themselves to lawyers in non-government related cases.
“The kind of audits I’m talking about there is where we perform a set of procedures as an independent third party to take your financial statements as a business — your balance sheet, your PML, your statement of cash flows, statement of equity, that kind of thing, and we … make sure that your financial statements represent (the financial condition of your company) fairly according to generally accepted accounting principles in the United States,” said Denny.
The Santa Clarita CPA explained that this sort of audit may be useful when discussing financial issues with “a third party who might want to invest in your company or a bank that might want to loan you money.”
Additionally, Denny said that these audits can be of use if a business partnership dissolves, saying that these documents help to “assure the court or the lawyers that everybody’s talking about the same thing and that one (business partner) is not cheating the other.”
“We do those kinds of procedures for personal financial statements as well, because often banks will want to know what your personal wealth is and make sure that it’s verified by an independent party,” Denny said.
The Santa Clarita CPA acknowledged that any sort of audit can be expensive. He noted that in some cases, a review or compilation might be sufficient when a less thorough examination of a company’s finances is needed.
“An audit versus review versus compilation, those are levels of assurance,” said Denny. “A lot more work goes into an audit and there’s a higher level of assurance, therefore, to the third party that what they’re seeing is what’s actually going on.”
Compared to reviews and compilations, Denny said that “there’s less checking, and the procedures are less odious.”
He explained that compilations, the least rigorous process of the three aforementioned processes, is “pretty much just putting together the financial statements for someone and making sure that the disclosures that are included include things that are required and are important to the bank.”
Although reviews and compilations are less involved compared to audits, Denny said that CPAs must still pay close attention to detail when drawing up these documents.
“Just a balance sheet may not tell the whole story,” Denny explained. “There may be some disclosures notes (in) the financial statements … that explain different parts of it so that a third party user would be able to understand it.”
For business owners and individuals interested in personal or business audits, reviews or compilations, Denny & Company can be contacted through their website or by calling (661) 286-8860.
The Santa Clarita CPA firm Denny & Company, LLP was established in 1984, and is a full-service firm of Certified Public Accountants in Santa Clarita, including Partners Matt Denny and Carolyn Denny. The Santa Clarita accountants work with small businesses and individuals, specializing in catering to each client’s unique needs and desires using a flexible approach. As a CPA in Santa Clarita, Matt Denny shares his knowledge and experience regularly on “Common Ground” on KHTS Radio. Those looking for the best CPA in Santa Clarita or a “CPA near me” can contact Denny & Company, LLP for more information today.
23929 Valencia Blvd. Suite 304
Valencia, CA 91355