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

This put up is a part of a sequence sponsored by Outdated Republic Surety.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). Typically that is triggered by a big undertaking alternative. Confronted with the opportunity of dropping a undertaking, 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. Nonetheless, development accounting is exclusive, and an accountant who just isn’t aware of its complexities might challenge a press release with out the wanted schedules, with a stability sheet and revenue 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 priceless 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 powerful monetary presentation, not just for the surety, but in addition 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Supervisor for CBIZ CPAs, P.C., and Kelly Kimmel, Contract Bond Supervisor for the Kansas Metropolis department at Outdated Republic Surety Firm collaborated on answering the ceaselessly requested questions that many corporations have when seeking to have interaction an exterior CPA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 powerful CPA-prepared monetary assertion will do a number of issues:

• Assist make sure the accuracy of the data supplied,
• Standardize monetary shows in accordance with GAAP [Generally Accepted Accounting Principles], and
• Present schedules and breakdowns of firm monetary data displaying necessary particulars on how profitability and cash flows by means of 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 could additionally help within the surety’s capability 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, based on compliance guidelines, they intend on acquiring the data wanted to offer an sufficient assertion.

Nonetheless, the accountant you could have at all times used in your taxes might not at all times be your best choice 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. Typically, it’s best observe to have separate consultants for every service, to make sure each your monetary assertion and taxes are assembly the proper, most modern necessities.

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

• Contact your present accountant or monetary adviser. CPA companies often have separate departments for every service. They can collaborate on gathering monetary data, lessening the quantity of double work which may be required in finishing each a year-end GAAP monetary assertion and a tax return. Be aware in your communication so you’ll be able to make sure that the beneficial accountant has the {qualifications} and expertise required for each companies.
• Request suggestions out of your surety agent or underwriter. Typically these can be your finish customers of the assertion and subsequently they’ve a good suggestion of what they’re eager to see and examples of accounting companies which have supplied different shoppers with acceptable statements up to now.
• Go to the CFMA Web site’s Service Supplier Listing. CFMA (Development Monetary Administration Affiliation) is a construction-oriented accounting group. The CPA companies which are lively within the CFMA neighborhood 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 companies that they use and what their expertise has been. Additionally ask in regards to the suggestions they’ve obtained from their surety corporations on the statements.

What questions ought to I ask the CPA?

Upon getting 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 aid you higher qualify your CPA:

• Total development accounting data
  • Do you ceaselessly carry out development accounting companies?
  • Are statements ready by people or a staff 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 a press release?
• Tailor-made experience
  • Are you able to present a high-level description of the kind of development 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 techniques earlier than?
  • What has your expertise been with these techniques?
• 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 supply finest observe options when observing our firm’s inside controls?
  • What challenges have you ever discovered that related corporations skilled when partaking 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 Outdated 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

Subjects
Underwriting