Your Underwriter Says You Want a CPA-Ready Assertion. What Now? Half I

Date:


This submit is a part of a sequence sponsored by Previous Republic Surety.

Many industrial contractors have skilled the stress attributable to the surety requiring them to acquire a monetary assertion ready by a licensed public accountant (CPA). Typically 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 problem. Nonetheless, building accounting is exclusive, and an accountant who shouldn’t be aware of its complexities might subject an announcement with out the wanted schedules, with a steadiness 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 worthwhile time, to not point out 1000’s 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 position of a CPA in getting ready compiled, reviewed or audited statements, is crucial to make sure a contractor will get a robust monetary presentation, not just for the surety, but additionally to make the most of for their very own inside controls. Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C., and Kelly Kimmel, Contract Bond Supervisor for the Kansas Metropolis department at Previous Republic Surety Firm collaborated on answering the steadily requested questions that many corporations 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 knowledge offered,
  • Standardize monetary displays in accordance with GAAP [Generally Accepted Accounting Principles], and
  • Present schedules and breakdowns of firm monetary info exhibiting necessary particulars on how profitability and cash flows via the corporate.

A powerful monetary presentation is a major issue the surety makes use of when confirming that an organization’s character, capability and capital align with their underwriting urge for food. It will possibly additionally help within the surety’s potential 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, based on compliance guidelines, they intend on acquiring the data wanted to offer an satisfactory assertion.

Nonetheless, the accountant you’ve 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 troublesome to be an knowledgeable in a single, not to mention each. Usually, it’s best observe to have separate specialists for every service, to make sure each your monetary assertion and taxes are assembly the right, most modern 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 can collaborate on gathering monetary info, 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 possibly can be sure that the beneficial accountant has the {qualifications} and expertise required for each providers.
  • Request suggestions out of your surety agent or underwriter. Typically these might be your finish customers of the assertion and due to this fact they’ve a good suggestion of what they’re desirous to see and examples of accounting corporations which have offered different purchasers with acceptable statements up to now.
  • Go to the CFMA Web site’s Service Supplier Listing. CFMA (Building Monetary Administration Affiliation) is a construction-oriented accounting group. The CPA corporations which might be lively within the CFMA group are typically 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 concerning the suggestions they’ve acquired from their surety corporations on the statements.

What questions ought to I ask the CPA?

After you have narrowed down your search, be sure you select the precise accomplice by asking the precise questions. The next are some examples of questions that will assist you to higher qualify your CPA:

  • Total building accounting data
    • Do you steadily carry out building accounting providers?
    • Are statements ready by people or a staff of accounting professionals?
    • Do the people engaged on accounts change from yr to yr?
    • How does your agency guarantee that you’re updated on the latest 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 building 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 based mostly 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 greatest observe solutions when observing our firm’s inside controls?
    • What challenges have you ever discovered that comparable corporations 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 printed on the Previous Republic Surety web site. It’s reproduced right here with permission.

Assets
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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