Author: Baird Team Member

As we wade into the depths of continuous technological advancement, a range of automation has surfaced that could alter the way we live, work, and relate to one another. These changes could transform every industry around the globe. Within the scope of the audit practice, computerized devices have the potential to allow an auditor to interpret larger volumes of data related to a company’s financial information. Audit firms are seeing the impact of this reliance on technology within specific areas such as Artificial Intelligence (AI), blockchain, and data analytics and how these automations are impacting the audit profession.

Numerous forms of financial statement accountability evaluations exist and, with some being so similar, it is vital to discern the difference between them when deciding which is appropriate for your business or nonprofit entity. Two evaluations, the financial audit and the financial statement review, are so similar in nature that it’s important to understand the differences. The primary differences between financial audits and reviews are the level of assurance, the reliance on company management, the work performed, and the need to understand internal controls.

For business owners who have hired a CPA or Audit Firm to conduct an independent audit of your financial statements for the first time, the results can be deceiving. Whether your organization is required to perform an annual audit, seeking a merger or acquisition, approaching an IPO, or seeking a business loan, navigating an independent auditor’s report can be slightly confusing. An unqualified opinion, which seems like it would be a bad thing, is actually the best result that you can get, stating that your company has followed all GAAP guidelines and your financial statements are free of any material misstatements. On the other hand, a qualified opinion states the opposite: either the financial statements of your organization contain misstatements, or the auditor is unable to obtain evidence regarding a certain account balance. It’s important to note that the misstatements shouldn’t have a pervasive effect on your financial statement.  The primary question we want to answer today, however, is what to do after receiving a qualified opinion.

As a company leader, you naturally worry about protecting your business from being exposed to risks. Like the Trojans discovered, the mightiest walls can sometimes fall easier from within than from outside. As a business owner or corporate leader, you should be aware it’s estimated that almost 33% of all business failures involve company fraud or theft of some sort. These deceitful activities often include fraudulent disbursements, skimming or diverting business funds, misappropriating customers or trade secrets, embezzlement, and even downright larceny. Knowing the steps to safeguard your organization from these risks will not only help your business grow, but likely ensure it prospers.

Determining the value of audit is a straightforward and non-precarious activity. As accounting professionals, we, of course, refer to audit from a financial audit standpoint, but there are many types of audits including compliance audit, tax audits, and operational audits, to name a few. A financial audit is the analysis of the fairness of information in an organization’s financial statements and is the most common type of audit conducted. Audit firms conduct these types of audit independent of the business entity. When it comes to auditing private companies, regulators have numerous audit requirements that also change over time. The main value of having a financial audit can be surmised by subtracting the cost of the audit from value-added items such as ensuring accountability and reliability, increasing credit rating and value, and gaining a clear picture of the overall health of the business.

Obtaining federal tax-exempt status is somewhat of a mystery for many incorporated business owners. Gaining tax-exempt status for your nonprofit 501(c)(3) organization is necessary to reap the majority of the real benefits, such as access to grant money, income exemptions, property exemption, and tax-deductions for donations received. Therefore, it’s important to understand the steps to successfully apply for tax-exempt status.

There are various types of audit opinions, so they can easily be confusing for the non-finance and accounting manager. Due to the enormous amount of man-hours and costs associated with financial reporting, the SEC has left the financial reporting process for publicly listed companies to public accounting firms. Certain companies and types of organizations must hire an independent auditing organization, such as a public accounting firm familiar with financial audits, to perform an examination of company financial statements, as well as provide reasonable assurance that statements follow guidelines set out by the U.S. GAAP.

Certain nonprofits are required to undergo an independent audit on an annual basis. An independent audit is needed if requested by a federal, state, or local governing body, if your nonprofit has more than $750,000 in federal expenditures, or as a condition of receiving a loan or grant. An Independent audit provides a professional opinion of a nonprofit organization’s financial statements, attesting that they are fairly presented and in accordance with generally accepted accounting principles (GAAP). An independent audit gives reasonable assurance about whether the financial statements are free of material misstatements.

In accordance with the Employee Retirement Income Security Act (ERISA), retirement accounts with more than 100 eligible participants at the start of the plan year are considered large retirement funds. These large retirement funds require that an annual audit of plan financial statements be conducted by an independent, qualified public accountant.

With the most extensive overhaul of the U.S. tax code in more than three decades having now been passed by both Houses of Congress, and officially signed by President Trump to enact it into law, tax reform is here.  These changes will require businesses and individuals to re-evaluate their long-term tax strategies starting in the 2018 tax year, but also means taking immediate year-end tax planning strategies for the final days of 2017 into consideration.