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

This publish is a part of a collection sponsored by Previous Republic Surety.

Many industrial 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 challenge alternative. Confronted with the opportunity of dropping a challenge, 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 problem. Nevertheless, development accounting is exclusive, and an accountant who isn’t acquainted with 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 invaluable 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 making 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 additionally to make the most of for their very own inner 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 often requested questions that many firms have when trying to have interaction an exterior CPA for making 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 exhibiting necessary particulars on how profitability and cash flows by means of the corporate.

A robust 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 may possibly additionally help within the surety’s potential 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 proportion of completion) assertion earlier than, as long as, in accordance with compliance guidelines, they intend on acquiring the information wanted to offer an enough assertion.

Nevertheless, the accountant you’ve gotten at all times used in your taxes might not at all times be your only option when participating a CPA for a GAAP-complying monetary year-end assertion. Each GAAP requirements and the tax codes are complicated, and it’s tough to be an knowledgeable 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 right, most recent necessities.

The next are a couple 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 which may be required in finishing each a year-end GAAP monetary assertion and a tax return. Be aware in your communication so you may be sure that the really useful accountant has the {qualifications} and expertise required for each providers.
• Request suggestions out of your surety agent or underwriter. Typically these will probably 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 corporations which have offered different purchasers 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 corporations which might be lively within the CFMA neighborhood are usually skilled in offering monetary statements utilized by contractors to help their surety program.
• Ask trusted friends within the trade. Ballot different professionals throughout the trade on the CPA corporations that they use and what their expertise has been. Additionally ask in regards to 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 you select the appropriate associate by asking the appropriate questions. The next are some examples of questions that will enable you to higher qualify your CPA:

• Total development accounting information
  • Do you often carry out development accounting providers?
  • Are statements ready by people or a workforce 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 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 development and area’s that your purchasers 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 intensive?
  • Have you ever labored with my software program programs earlier than?
  • What has your expertise been with these programs?
• Asset to your agency
  • Do you present perception and experience to your purchasers on what challenges and alternatives others within the trade 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 trade?
  • Do you supply finest apply recommendations when observing our firm’s inner controls?
  • What challenges have you ever discovered that comparable firms 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 printed 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

Matters
Underwriting