|There are many reasons to get a financial statement. Some of the most common reasons:
CPAs can legally issue four types of financial statements:
Reviewed financial statements provide limited assurance. These are used under special situations. For example, bank loans that fall in a certain range may require reviewed financial statements. These are much more expensive than compiled financial statements and much less expensive than audits. Your CPA is required to be independent in order to issue a reviewed financial statement.
Compiled financial statements are the next most common type of financial statement. These may or may not be presented in conformity with general accepted accounting principles (GAAP). And, they may or may not be presented with full disclosures and all statements required in a full GAAP presentations. When prepared with only profit and loss and balance sheet statements they can be quite inexpensive. However, they do not provide any assurance to a reader who is not familiar with the company.
Your CPA is not required to be independent to issue a compiled report. However, if he/she helps you with your bookkeeping or other inter-dependent activities, the lack of independence must be disclosed.
Management Use Only
In Ken’s experience, the most common financial statements are management use only. When prepared formally, these include a written agreement with management that they will not be used for any other purpose. They have the added bonus that certain accounts can be valued in a manner that is meaningful to management.
If you have questions about what type of financial statement will move you closer to your dreams, give Ken a call.