Can a CPA Certify Financial Statements?

Certified Public Accountants (CPAs) are often called upon to provide their expertise when it comes to certifying financial statements. However, the question arises as to whether a CPA can certify financial statements. 

The quick answer is yes, a CPA can create a certified financial statement, but there are a number of things to be aware of. 

In this article, we will explore the role of a CPA in certified financial statements. We’ll also take a look at the difference between the three types of financial statement reports done by CPAs so you can better understand the purpose of each one.

What is a CPA?

First of all, what exactly is a CPA’s role? A CPA is a professional accountant who has completed the necessary education, experience, and exam requirements to become certified. 

In order to become a CPA, it is necessary to pass the Uniform CPA Exam, which is a rigorous four-part exam that tests knowledge in accounting, auditing, business law, and taxation. It’s not for the faint-hearted.

Additionally, most states require CPAs to have a certain number of years of work experience in the field before they can become certified. So as you can see, CPAs are highly experienced in their role and are the best of the best when it comes to accounting.

What does a CPA do?

CPAs are trained to provide a wide range of accounting and financial services. 

They can work in public accounting firms, government agencies, corporations, or as individual consultants. CPAs are able to provide tax preparation and planning services, financial planning and analysis, audits, and assurance services. 

Since they have deep financial knowledge, they are also often called upon to provide financial advice and help businesses and individuals navigate complex financial situations.

Is a CPA higher than an accountant?

Many people assume that accountants and CPAs are one and the same, but in reality, there is a big difference. 

All you need to be aware of is that all CPAs are accountants, but not all accountants are CPAs. You can become an accountant without becoming a CPA but you cannot become a CPA without first qualifying as an accountant.

CPAs have gone one step higher than normal accountancy to complete the rigorous requirements to become certified. And it’s this certification that indicates a higher level of expertise and credibility in the field of accounting.

What is the process of certifying financial statements?

The process of creating a certified income statement involves the preparation of financial statements and the subsequent review or audit of those statements by a CPA or auditor. 

The purpose of this process is to provide assurance to stakeholders that the certified financial statement examples are accurate and reliable.

What is included in the certification process?

In order to get the financial statement signed by CPA professionals, you must go through a number of steps first:

  • First you must understand the scope of the engagement, identifying any potential risks, and determine the level of assurance required.
  • Next, your CPA must gain a thorough understanding of your business operations, financial reporting, and internal controls.
  • Then, the CPA collects data from various sources, including financial statements, accounting records, and other relevant documents.
  • Once the data is gathered, the CPA analyzes the data collected to determine if there are any errors, discrepancies, or irregularities.
  • Finally, the CPA prepares a report of certified financials that summarizes the findings and assures stakeholders regarding the financial statements’ accuracy and reliability.

How long does the certification process take?

The length of the certification process can vary depending on the type of engagement being performed, the complexity of the financial statements, and the size of the organization. 

While a simple compilation engagement may take a few hours, an audit engagement may take several weeks or months, so you must plan well ahead for this circumstance.

Outsourced payroll - vector image of a business owner holding a coin with accounting tools.

What are the benefits of certifying financial statements?

Certifying financial statements provides several benefits, including:

  • Increased credibility: Certified financial statements are much more credible and reliable, which helps improve your business reputation and trustworthiness
  • Improved decision-making: Any stakeholders can make better-informed decisions when they have access to accurate and reliable financial information.
  • Compliance: You are likely to find that your business is required by law to have its financial statements certified by a CPA or auditor.

Who are the people involved in the certification process?

The certification process doesn’t just involve the CPA, although their role is integral. There are several other players that perform key tasks in the balance sheet certification process.

Let’s take a look at them.

CPAs

We’ve already covered CPAs in some detail so we already know that they are responsible for conducting the review or audit of the financial statements and providing assurance to stakeholders regarding the accuracy and reliability of the statements. 

In addition to providing the certified profit and loss statement, they may provide additional financial and accounting services to the organization, such as tax planning and financial analysis.

Auditors

Auditors are external professionals the organization hires to independently review or audit the financial statements. They provide an objective assessment of the financial statements and assure stakeholders regarding the statements’ accuracy and reliability.

Independent Directors

Lastly, you have independent directors. These professionals are members of the organization’s board of directors who are not directly affiliated with the organization. 

They provide an objective perspective on the financial statements and can help ensure that the organization is following proper accounting and financial reporting practices.

What role do CPAs play in the certification process?

CPAs play a critical role in the certification process and you cannot get financial statements certified without them.

They are responsible for reviewing or auditing the financial statements and providing assurance to stakeholders regarding the accuracy and reliability of the statements. They are the only individuals with the necessary qualifications to enable a certified CPA financial statement report to be created and used.

What are the three types of financial statement reports done by CPAs?

Now, let’s look at the three types of financial statement reports:

  • Compilations
  • Reviews
  • Audits

What is a compilation report?

A compilation report is the most basic type of financial statement report and the quickest to generate.

It involves the preparation of financial statements by the organization, along with the CPA providing a report stating they have compiled the financial statements in accordance with accounting standards. 

However, in this case, the CPA does not provide any assurance regarding the accuracy or reliability of the financial statements.

What is a review report?

A review report provides limited assurance regarding the accuracy and reliability of the financial statements. 

The CPA performs analytical procedures and inquiries to determine if there are any material modifications that need to be made to the financial statements. 

However, the CPA does not perform a full audit and does not provide an opinion on the financial statements.

What is an audit report?

An audit report provides the highest level of assurance regarding the accuracy and reliability of the financial statements. 

The CPA performs extensive testing and analysis of the financial statements and provides an opinion on whether the statements are free from material misstatement.

What is the key difference between these three types of reports?

The key difference between the three types of reports is the level of assurance provided by the CPA:

  • A compilation report provides no assurance
  • A review report provides limited assurance
  • An audit report provides the highest level of assurance.

How to decide if you need to conduct a review or an audit?

The decision to conduct a review or an audit depends on several factors, including the size and complexity of the organization, the level of risk associated with the financial statements, and the needs of stakeholders. 

Generally, if you are a small business, you may only need a compilation or review engagement, while larger organizations or those with higher levels of risk may require an audit engagement.

What services does each type of CPA engagement provide?

Each type of CPA engagement provides different levels of assurance and financial services:

  • A compilation engagement involves the preparation of financial statements and a report stating that they have been compiled in accordance with accounting standards. 
  • A review engagement provides limited assurance regarding the accuracy and reliability of the financial statements
  • An audit engagement provides the highest level of assurance and involves extensive testing and analysis of the financial statements

Which type of report should you choose for your business?

The type of report you choose for your business depends on several factors, including the size and complexity of your organization, the level of risk associated with the financial statements, and the needs of your stakeholders.

 A CPA can help you determine which type of engagement is appropriate for your business.

How much does it cost to work with a CPA?

The cost of working with a CPA is generally around $180 per hour.  The cost of your required certification will also directly impact the cost. Remember,  compilation engagements take a lot less time to complete than audit engagements, so will therefore cost a lot less in CPA hours worked. 

Discussing fees with the CPA before engaging their services is important to ensure that the cost is reasonable and within the organization’s budget.

Another great solution is to engage the services from a virtual CPA provider such as Finvisor. Since your CPa works remotely, you do not have to factor in travel or accommodation costs and other related expenses. For organizations on a limited budget, this is often an attractive proposition.

What should you expect from your first meeting?

During your first meeting with a CPA, you should expect to discuss the organization’s financial operations, the type of services required, and the level of assurance needed for the financial statements. 

The CPA may also ask for information regarding the organization’s accounting and financial reporting practices, such as the types of software used and the process for preparing financial statements.

How often should you hire a CPA?

The frequency of hiring a CPA depends on the needs of your organization. 

If you’re only a small business, then you may only require occasional services, such as tax planning or assistance with financial statement preparation. Larger organizations may require more frequent services like annual audits or reviews. 

It is important to discuss the organization’s needs with the CPA to determine the appropriate frequency of engagement.

The beauty of hiring virtually with Finvisor is that you only pay for the level of service that you require when you require it. What this means is that you’re not locked into a contract where you’re stuck paying for hours that you don’t actually need. 

Need to scale up your CPA service? No problem. Need to reduce the service? No problem either.

Conclusion

In conclusion, a CPA can certify financial statements by preparing compilation, review, or audit reports. And each type of report provides a different level of assurance regarding the accuracy and reliability of the financial statements. 

Furthermore, a CPA provides you with valuable financial services, including tax planning, financial analysis, and assurance regarding the accuracy and reliability of financial statements. Ultimately, a CPA is a crucial ally for financial planning and preparation.

If you are curious about how Finvisor can help you with your CPA requirements, make sure you get in touch with our friendly team.

Along with our expert virtual CPAs, we also offer a full suite of accounting, payroll, and HR services. This means you can offload these vital functions to qualified professionals, leaving you free to concentrate on growing your business.

To learn more about what we do, or to request a quote, contact us at hello@finvisor.com or 415-416-6682. We’re here to help you navigate deferred revenue journal entries so you can make the most of your assets!

*This blog does not constitute solicitation or provision of legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction.*

FOR ANY QUESTIONS

CONTACT US

Finvisor HQ
48 2nd St, 4th Floor
San Francisco, CA 94105

hello@finvisor.com

"*" indicates required fields

Details
Can Finvisor reach out to you via SMS?
This field is for validation purposes and should be left unchanged.

Supercharge your business’ finance journey

Join our newsletter to recieve exclusive updates from the Finvisor team and valuable tips for your business finance journey.

    Skip to content