Audited Financial Statements

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An audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Audited financial statements provide the most assurance of all of the financial statement formats prepared by a CPA.

Because audited financial statements provide the most assurance of all of the financial statement formats prepared by a CPA, they are ideal for when an Organization needs outside funding from a bank or other lending institute, or simply wants a third party opinion on the financial statements. They are comprehensive, and can be given to any third party. However, an audit is generally the most costly of the financial statement-producing services.

Reviewed Financial Statements

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A review consists principally of inquiries of the Organization's personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit, but still provides limited assurance that the financial statements are materially free from misstatements. Unlike an audit, no opinion regarding the financial statements taken as a whole is expressed.

Because it is less expensive than an audit, is comprehensive without involving the disclosures required by an audit, and still provides assurance on the financial statements that third parties can rely on, a review is often preferable to an audit for the purposes of obtaining funding from banks or other lending institutes. It should be kept in mind, however, that a review provides only limited assurance regarding the financial statements, and many lending institutions do not accept them in place of an audit.

Compiled Financial Statements

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Compiled statements involve taking client data and information and putting it in the form of a financial statement. The accountant is not required to test the representations made in the financial statements unless he knows that the information is incorrect, incomplete, or unsatisfactory information.

Compiled financial statements can be useful when:

  • The Organization needs to provide financial information to a third party that has some involvement by a CPA or accountant and does not want or cannot afford an audit or a review. Advantages of a compilation over other types of services:
  • It is less costly to prepare than other types of financial statements.
  • It requires less documentation and thus less work on the client's part.
  • Disadvantages of a compilation:
  • Not all lending institutions or third parties will accept a compilation.
  • A compilation does not require the CPA to verify accuracy of your account balances.

Audits, Reviews, & Compilations of a Specified Element

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The differences between an audit, a review, and a compilation are described under each respectively labeled section. This type of engagement is different because it does not involve the entire financial statement but allows the client to define a "specified element or elements" to be examined and reported on. An example of this would be "Cash" and/or "Contribution Income."

An Audit of a Specified Element is particularly useful for many organizations because it can be given to a lending institution or third party just like an audit, providing the assurance of an audit without the cost. The Organization can target the account(s) most important to them to be audited. It also includes a review of internal controls, which many organizations find extremely helpful.

Tax & Payroll Reporting Services

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Tax services include preparation of:

  • Individual federal income tax returns (form 1040)
  • Non-profit informational returns (form 990)
  • Quarterly tax returns (form 941)
  • W-2s and 1099s.
  • Salary and benefit packages for ministers

Agreed Upon Procedures

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Agreed-upon procedures is a very specific type of engagement. It is one in which the CPA is engaged by a client to perform specific procedures and to report findings. The CPA does not perform an audit or provide an opinion relating to the subject matter or assertion about the specific matter. Rather, the CPA performs only those procedures that have been agreed upon and reports findings.  This procedure can be useful when the church or nonprofit organization only wants to have tests performed on a very specific aspect of their finances or accounting procedures.

Review of Internal Controls

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A review of Internal Controls includes discussions about the current accounting procedures with the Organization's personnel, analyzing the effectiveness of these procedures, and making verbal and written recommendations for improvements to the overall accounting system and internal control policies. If the client so desires, we can work with you throughout the specific implementation of our recommendations or review the effectiveness of your implementation at a later date. We, as a firm, are committed to serving our clients in whatever capacity the client needs or wants. This process takes approximately 20 hours of billable time.

Education of Personnel and Finance Committee

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In today's climate, it is important that the Organization's committees educate themselves on the current tax and accounting requirements that they are responsible for. The IRS will hold volunteers responsible for financial decisions that lead to actions such as nonpayment of payroll taxes, overpayment of employee wages, etc. The Firm can hold seminars at your Organization for your committee members and/or staff or meet with specifics individuals on the topic of your choice.

Cynthia Cox has performed the annual financial audit for Metropolitan Baptist Church for the past nine years. As Finance Manager for the church, I have had the pleasure of providing her financial information to complete her task for the past six years. She has shown herself to be a thoroughly professional individual; her integrity is above reproach. In working on the audit, Mrs. Cox has gone above and beyond her job in helping us set procedures to ensure the church staff members perform their duties in compliance with IRS guidelines. While this is not necessarily part of the audit process, it has been extremely valuable. Mrs. Cox knows all aspects in the church business arena and is adept at passing that information on as needed. I hope to work with Mrs. Cox for many years to come. - Jean Bellow, Finance Manager Metropolitan Baptist Church, Houston, TX