Which Businesses Are Required to Have Audits?
An audit provides the public with assurance that a company has its financial records in check. While not every business faces an audit situation, there are certain circumstances and certain businesses which are required to have audits.
Reasons Businesses are Required to Have Audits
In order to ensure that financial statements of public companies are correct throughout the buying and selling of stocks to investors, audits are performed. Companies who conduct business with the government are often required to have audits to ensure compliance with terms and conditions set forth within their contracts. Private companies, public companies, and non-profits all have certain situations when an audit would be required.
Situations Where Businesses Are Required to Have Audits
Audit standards for private companies are less stringent than those for publicly listed firms because they face fewer disclosure requirements. Small privately-owned businesses do not fall under the analysis of the Securities and Exchange Commission (SEC), as they are not publicly traded firms. Auditors are beginning to address imbalances between the need for increased transparency within financial documents by smaller firms and the increased burdens small business owners would face under harsher reporting rules.
Many for-profit firms require audits, particularly those which participate in federal programs. The SEC also requires publicly traded companies to provide GAAP (generally accepted accounting principles)-compliant audited financial statements. Also, businesses whose ownership and stock shares and bonds are traded in public markets in the United States are required to have annual audits by an independent CPA firm. This is mandated by the federal securities laws of 1933 and 1934.
Nonprofit audits occur in certain instances. An instance in which an audit would need to be conducted is when the nonprofit has spent more than $750,000 or more in federal funds. Other instances of an audit being necessary could be when nonprofits have had contracts with local and state governments or have received loans and may be required by their financial institutions to have an audit performed. There are also numerous states where nonprofits must submit copies of their financial statements when they register with the state for fundraising purposes.
The Baird Audit Group Performs Audits for Governments and Businesses in Georgia, South Carolina, and Tennessee
Questions about audits are likely. At The Baird Audit Group we are ready to assist you and your firm with compliance, understanding, and auditing information. The Baird Audit Group is long established in audit, tax, consulting, and bookkeeping services, and we have developed a suite of audit specialties. Our team is trained in government management, auditing, accounting intricacies, and more to better serve you and your business. Reach out today online, via email, or by phone at 706-855-9500.