A financial statement audit can give lenders, investors and other stakeholders greater confidence in your business’s financial reporting. But not every private business needs an audit — and you must weigh the potential benefits against the cost and time involved.
Understand what an audit provides
Most businesses maintain an in-house accounting system to manage their financial records. The documents your staff prepares through this system are called “internally prepared financial statements.”
Depending on your business’s needs, internally prepared financial statements may follow U.S. Generally Accepted Accounting Principles (GAAP), a tax basis, a cash basis or another financial reporting framework. However, internal statements may not include all the adjustments, disclosures and other elements required under the applicable framework.
During an external audit, an independent CPA performs risk assessment procedures and obtains evidence about amounts and disclosures in your financial statements. The goal is to obtain reasonable assurance that the statements are free from material misstatement, whether caused by error or fraud. Management remains responsible for preparing the financial statements and maintaining appropriate internal controls.
If the auditor issues an “unmodified” opinion — sometimes called an “unqualified” opinion — the auditor has concluded that the financial statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.
A qualified opinion means the statements are presented fairly except for a specific material matter. It may result from a material departure from the applicable reporting framework or the auditor’s inability to obtain sufficient appropriate evidence about a particular issue. Depending on the circumstances, material and pervasive issues could lead to an adverse opinion or a disclaimer of opinion.
Balance the benefits and costs
U.S. public companies generally must issue audited annual financial statements. External stakeholders often influence a private business’s decision to prepare audited financial statements. For instance, lenders and investors might ask for audited financial statements before providing financing. Similarly, audited financial statements may be a prerequisite for obtaining surety bonds or bidding on certain government contracts.
Even when an audit isn’t required, audited statements may strengthen the credibility of your financial reporting and help stakeholders evaluate your business. For example, audited financial statements can help you prepare for a business sale, merger or initial public offering.
From an internal perspective, an audit may also identify needed accounting adjustments, disclosure issues or weaknesses in internal controls that deserve management’s attention. Auditors use risk-based procedures, which may include inspecting records, confirming information with third parties, observing certain activities and testing selected transactions. However, an audit doesn’t examine every transaction or guarantee it will detect all errors or fraud.
Despite these potential benefits, your business shouldn’t pursue an audit without careful consideration. An outside audit requires a financial investment and substantial time and effort from you and your employees. You’ll need to gather and provide extensive documentation and respond to the auditor’s questions and requests for evidence.
Ready, set, audit
Whether an audit is required or voluntary, early preparation can make the process more efficient. Audit planning often begins months before fieldwork starts. If your business operates on a calendar year, now is a good time to review your accounting records, reconcile key accounts, gather supporting documentation and address accounting or internal control issues that could complicate the audit process. Contact us to discuss your upcoming audit and identify steps you can take to get your books and records audit-ready.
© 2026
