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

This submit is a part of a collection sponsored by Outdated Republic Surety.

Many business contractors have skilled the stress attributable to the surety requiring them to acquire a monetary assertion ready by a licensed public accountant (CPA). Usually that is triggered by a big mission alternative. Confronted with the potential for shedding a mission, 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 trouble. Nevertheless, building accounting is exclusive, and an accountant who isn’t accustomed to its complexities might subject an announcement with out the wanted schedules, with a steadiness sheet and earnings assertion that don’t accurately tie into the schedules, or any variety of different errors rendering it unusable for the surety underwriter. At this level the contractor has spent precious time, to not point out hundreds 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 function 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Supervisor for CBIZ CPAs, P.C., and Kelly Kimmel, Contract Bond Supervisor for the Kansas Metropolis department at Outdated Republic Surety Firm collaborated on answering the steadily requested questions that many firms have when trying to have interaction an exterior CPA for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 robust CPA-prepared monetary assertion will do a number of issues:

• Assist make sure the accuracy of the knowledge supplied,
• 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 robust monetary presentation is a big issue the surety makes use of when confirming that an organization’s character, capability and capital align with their underwriting urge for food. It may possibly additionally help within the surety’s capacity to stretch a contractor’s bonding credit score.

How do I select a CPA?

Legally, any CPA can have interaction in offering a reviewed assertion even when they’ve by no means ready a cost-to-cost (beforehand known as share of completion) assertion earlier than, as long as, in keeping with compliance guidelines, they intend on acquiring the data wanted to supply an enough assertion.

Nevertheless, the accountant you may have all the time used to your taxes might not all the time be your only option when partaking 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, latest necessities.

The next are a number of strategies for finding a construction-oriented CPA:

• Contact your present accountant or monetary adviser. CPA corporations often 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 may make sure that the beneficial accountant has the {qualifications} and expertise required for each providers.
• Request suggestions out of your surety agent or underwriter. Usually these shall be your finish customers of the assertion and due to this fact they’ve a good suggestion of what they’re eager to see and examples of accounting corporations which have supplied different shoppers with acceptable statements prior 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 can 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 trade. Ballot different professionals inside the trade on the CPA corporations that they use and what their expertise has been. Additionally ask concerning the suggestions they’ve obtained from their surety firms on the statements.

What questions ought to I ask the CPA?

Upon getting narrowed down your search, be sure to select the correct associate by asking the correct questions. The next are some examples of questions which will make it easier to higher qualify your CPA:

• Total building accounting data
  • Do you steadily carry out building accounting providers?
  • Are statements ready by people or a crew of accounting professionals?
  • Do the people engaged on accounts change from 12 months to 12 months?
  • How does your agency guarantee that you’re updated on the newest 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 shoppers work in?
  • What’s the dimension of the biggest 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 dimension?
  • Is your expertise on this space in depth?
  • Have you ever labored with my software program methods earlier than?
  • What has your expertise been with these methods?
• Asset to your agency
  • Do you present perception and experience to your shoppers on what challenges and alternatives others within the trade are experiencing primarily based in your observations?
  • Are you able to present benchmarking or perception into how our firm metrics examine with others within the trade?
  • Do you provide finest observe options when observing our firm’s inside controls?
  • What challenges have you ever discovered that comparable firms skilled when partaking a CPA?
  • What helped them overcome these challenges?

Proceed studying:
Part 2 of 3
Part 3 of 3

Co-written with Halli Williams, CPA, CCIFP, Senior Supervisor for CBIZ CPAs, P.C.

This weblog was initially printed on the Old Republic Surety website. It’s reproduced right here with permission.

Sources
https://www.ispartnersllc.com/blog/five-types-testing-methods-used-audits/
https://us.aicpa.org/content/dam/aicpa/research/standards/compilationreview/downloadabledocuments/ar-00090.pdf
https://www.procore.com/library/construction-financial-audit
https://us.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-00326.pdf
https://us.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au-c-00300.pdf

Matters
Underwriting