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

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

Many business contractors have skilled the stress attributable to the surety requiring them to acquire a monetary assertion ready by an authorized public accountant (CPA). Usually that is triggered by a big undertaking alternative. Confronted with the potential 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, building accounting is exclusive, and an accountant who shouldn’t be aware of its complexities may 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 precious 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 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 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 Previous Republic Surety Firm collaborated on answering the continuously requested questions that many corporations have when trying to interact an exterior CPA for getting ready a monetary assertion to help 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 data offered,
• Standardize monetary shows in accordance with GAAP [Generally Accepted Accounting Principles], and
• Present schedules and breakdowns of firm monetary data displaying vital particulars on how profitability and cash flows by way of 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 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 interact 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 information wanted to supply an ample assertion.

Nonetheless, the accountant you’ve got all the time used on your taxes could not all the time be the best choice when participating a CPA for a GAAP-complying monetary year-end assertion. Each GAAP requirements and the tax codes are complicated, and it’s troublesome to be an professional in a single, not to mention each. Typically, it’s best apply to have separate specialists for every service, to make sure each your monetary assertion and taxes are assembly the proper, newest 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 are able to collaborate on gathering monetary data, lessening the quantity of double work that could be required in finishing each a year-end GAAP monetary assertion and a tax return. Be aware in your communication so you possibly can be certain that the advisable accountant has the {qualifications} and expertise required for each providers.
• Request suggestions out of your surety agent or underwriter. Usually these will likely 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 offered different shoppers 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 are lively within the CFMA group are typically skilled in offering monetary statements utilized by contractors to help their surety program.
• Ask trusted friends within the business. Ballot different professionals inside the business on the CPA corporations that they use and what their expertise has been. Additionally ask in regards to the suggestions they’ve acquired from their surety corporations on the statements.

What questions ought to I ask the CPA?

After getting narrowed down your search, be sure to select the best associate by asking the best questions. The next are some examples of questions which will assist you higher qualify your CPA:

• Total building accounting information
  • Do you continuously carry out building accounting providers?
  • Are statements ready by people or a crew 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 shoppers work in?
  • What’s the dimension 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 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 business are experiencing based mostly in your observations?
  • Are you able to present benchmarking or perception into how our firm metrics evaluate with others within the business?
  • Do you provide finest apply ideas when observing our firm’s inside controls?
  • What challenges have you ever discovered that related 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 revealed on the Previous Republic Surety web site. It’s reproduced right here with permission.

Sources
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