This put up is a part of a sequence sponsored by Outdated Republic Surety.
Many business contractors have skilled the stress attributable to the surety requiring them to acquire a monetary assertion ready by a licensed public accountant (CPA). Usually that is triggered by a big challenge alternative. Confronted with the potential of shedding a challenge, it turns into a mad sprint, which can lead the contractor to decide on an accountant with the quickest turnaround time and who causes the least quantity of trouble. Nonetheless, development accounting is exclusive, and an accountant who just isn’t acquainted with its complexities might concern an announcement with out the wanted schedules, with a stability sheet and revenue assertion that don’t appropriately tie into the schedules, or any variety of different errors rendering it unusable for the surety underwriter. At this level the contractor has spent precious time, to not point out hundreds of {dollars}, for the assertion, however everyone seems to be again at sq. one, or worse, the bond is declined.
Understanding the anticipated time and capital funding, in addition to the function of a CPA in getting ready compiled, reviewed or audited statements, is crucial to make sure a contractor will get a powerful monetary presentation, not just for the surety, but additionally to make the most of for their very own inner controls. Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C., and Kelly Kimmel, Contract Bond Supervisor for the Kansas Metropolis department at Outdated Republic Surety Firm collaborated on answering the often requested questions that many firms have when seeking to interact an exterior CPA for getting ready a monetary assertion to assist their surety program.
Why does my surety care about my monetary statements?
Monetary evaluation is on the base of contract surety bond underwriting. A powerful CPA-prepared monetary assertion will do a number of issues:
- Assist make sure the accuracy of the data supplied,
- Standardize monetary displays in accordance with GAAP [Generally Accepted Accounting Principles], and
- Present schedules and breakdowns of firm monetary data displaying necessary particulars on how profitability and cash flows by way of the corporate.
A powerful monetary presentation is a big issue the surety makes use of when confirming that an organization’s character, capability and capital align with their underwriting urge for food. It could possibly additionally help within the surety’s means to stretch a contractor’s bonding credit score.
How do I select a CPA?
Legally, any CPA can interact in offering a reviewed assertion even when they’ve by no means ready a cost-to-cost (beforehand known as proportion of completion) assertion earlier than, as long as, in accordance with compliance guidelines, they intend on acquiring the information wanted to offer an satisfactory assertion.
Nonetheless, the accountant you have got at all times used on your taxes could not at all times be your only option when participating a CPA for a GAAP-complying monetary year-end assertion. Each GAAP requirements and the tax codes are advanced, and it’s tough to be an skilled in a single, not to mention each. Typically, it’s best follow to have separate consultants for every service, to make sure each your monetary assertion and taxes are assembly the proper, newest necessities.
The next are a couple of strategies for finding a construction-oriented CPA:
- Contact your present accountant or monetary adviser. CPA corporations normally have separate departments for every service. They are able to collaborate on gathering monetary data, lessening the quantity of double work which may be required in finishing each a year-end GAAP monetary assertion and a tax return. Be conscious in your communication so you’ll be able to be certain that the beneficial accountant has the {qualifications} and expertise required for each companies.
- Request suggestions out of your surety agent or underwriter. Usually these will probably be your finish customers of the assertion and subsequently they’ve a good suggestion of what they’re eager to see and examples of accounting corporations which have supplied different purchasers with acceptable statements up to now.
- Go to the CFMA Web site’s Service Supplier Listing. CFMA (Development Monetary Administration Affiliation) is a construction-oriented accounting group. The CPA corporations which might be energetic within the CFMA neighborhood are usually skilled in offering monetary statements utilized by contractors to assist their surety program.
- Ask trusted friends within the business. Ballot different professionals throughout the business on the CPA corporations that they use and what their expertise has been. Additionally ask in regards to the suggestions they’ve obtained from their surety firms on the statements.
What questions ought to I ask the CPA?
Upon getting narrowed down your search, ensure you select the appropriate companion by asking the appropriate questions. The next are some examples of questions which will allow you to higher qualify your CPA:
- Total development accounting information
- Do you often carry out development accounting companies?
- Are statements ready by people or a staff of accounting professionals?
- Do the people engaged on accounts change from 12 months to 12 months?
- How does your agency guarantee that you’re updated on the newest GAAP requirements?
- What’s the oversight course of to make sure that GAAP requirements are met when issuing an announcement?
- Tailor-made experience
- Are you able to present a high-level description of the kind of development and area’s that your purchasers work in?
- What’s the measurement of the most important contractor you’re employed with?
- What income vary do most of your contractors fall into?
- Have you ever labored with my scope of labor and firm measurement?
- Is your expertise on this space in depth?
- Have you ever labored with my software program techniques earlier than?
- What has your expertise been with these techniques?
- Asset to your agency
- Do you present perception and experience to your purchasers on what challenges and alternatives others within the business are experiencing primarily based in your observations?
- Are you able to present benchmarking or perception into how our firm metrics examine with others within the business?
- Do you supply finest follow recommendations when observing our firm’s inner controls?
- What challenges have you ever discovered that related firms skilled when participating a CPA?
- What helped them overcome these challenges?
Proceed studying:
Half 2 of three
Half 3 of three
Co-written with Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C.
This weblog was initially revealed on the Outdated Republic Surety web site. It’s reproduced right here with permission.
Sources
https://www.ispartnersllc.com/weblog/five-types-testing-methods-used-audits/
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/compilationreview/downloadabledocuments/ar-00090.pdf
https://www.procore.com/library/construction-financial-audit
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/auditattest/downloadabledocuments/au-00326.pdf
https://us.aicpa.org/content material/dam/aicpa/analysis/requirements/auditattest/downloadabledocuments/au-c-00300.pdf
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