Most of us have played a video game at some point in our life – likely even Super Mario or Donkey Kong. Some people scour online to find helpful tricks that will help them advance to the next level. Similarly, many of us are often looking for ways to help advance our business, and financial statement preparation may just be the winning strategy.
With today’s always-accessible-information overload, successful businesses focus on having current, company- specific financial data, which allows management to better evaluate business performance. Four easy steps of financial statement preparation could put your business on a whole new level of evaluating business performance. Specifically, businesses having their financial statements prepared externally by CRI have a new option available in the aptly named “Financial Statement Preparation” engagement. This option has just become effective for periods ended on or after December 31, 2015, and it has eliminated the old “Management Use Only” moniker to provide additional flexibility to both the business and CRI.
These 4 Easy Steps Take Your Financials to the Bonus Stage
Step #1: Outline the Engagement. This first step lays the foundation for a clearer understanding of the engagement by management and CRI. Management’s role playing and responsibility include various aspects of its business (the design of internal controls, accuracy of company records, detection of fraud, compliance with laws and regulations, etc.). They allow unrestricted access to the company’s records and employees—and select the basis with which the engagement will be performed (i.e. the engagement framework).
Usually this choice will be accounting principles generally accepted in the United States of America (“U.S. GAAP”) or the income tax basis of accounting; however, it could be the cash basis, international accounting standards, or some other suitable framework. It should be selected with the end user’s intended purpose in mind. (For example, this selection should contemplate whether the financials are for management only, or are being also utilized by a bank or investors.) Additionally, management should make sure the engagement is further tailored to meet their business needs. CRI then assesses the acceptability of the established framework and determines whether the ethical requirements regarding professional competence can be satisfied given management’s decisions.
Step #2: Sign the Engagement Letter. CRI documents in writing our understanding of the engagement objectives, limitations, and responsibilities of management. The agreement must be signed by both parties. Management will also agree to add a statement to each page of the financial statement noting no assurance is provided by CRI in this type of engagement.
CRI does not have to be independent of the company or evaluate independence with the company for a financial statement preparation engagement.
Step #3: Perform the Engagement. Understanding the engagement’s objectives and limitations selected in the above two steps and using records provided by management, CRI performs the engagement by obtaining an understanding of company accounting policies and preparing the financial statements in accordance with the established and selected framework.
Step #4: Evaluate Business Performance. Because of the new “no assurance” wording on each page of the financial statement, management now has current, fully-functional financial statements built to its own specifications for internal and external use. Now, the possibilities for evaluating your business performance are endless and allow you to warp forward toward your goals.
“Power Up” with CRI
If your financial statements do not meet the needs of your business, a financial statement preparation engagement could be the key to evaluating and “turbo” unlocking your business’ potential. So enter the financial statement preparation game wisely—with the right CPA firm and achieve every trophy, badge, award, or medal available to your company. Contact CRI today to schedule an appointment to discuss handling your financial statement preparation.