Five Tips for Finding the Right CPA Audit Firm for your Family Business

Whether for a financial report on the audit or review standard, no one loves going through the independent financial evaluation process, but it is a necessary step to ensure that your business is financially healthy and prepared for opportunity or hardship and follows accepted accounting practices.

When it comes time for an audit – either one you are compelled to participate in by a lender, customer, or other agreement or one you have chosen to initiate – you will want to make sure you have a solid partnership in place with a CPA firm.

A good CPA firm will not only help you navigate the process, but also provide independent, objective feedback.

In this article, we have outlined everything you need to know to find the CPA audit firm that is the right fit for your family business.

What is a CPA audit firm?

When you are setting up a partnership with an accountant, you will find both accounting firms and CPA firms.

Our recommendation is to look for a CPA firm, which simply means that the organization employs at least one accountant who holds a valid Certified Public Accountant certification for your state.

We believe the value of working with a CPA firm stems from the CPA certification itself – it helps ensure that you are working with accountants who are both highly qualified and highly knowledgeable about accounting practices.

They have also consistently operated with integrity in order to retain their license over time.

Why does your family business need a CPA audit firm?

A CPA audit firm can act as an external auditor.

Having someone from outside your organization review & report your financial statements, financial internal control safeguards, and validate your financial status is a must for today’s family business.

This outside validation improves your credibility and helps stakeholders accurately assess your business’ financial health.

In addition, a CPA audit firm can help you identify needed process improvements, ensure all applicable government and regulatory compliance, and help you prevent and/or identify fraud.

Without the conflict of personal relationships, an independent CPA audit firm is ideally positioned to objectively assess your financial processes and overall financial health – and to make recommendations for improving both.

Five tips for finding the right CPA audit firm

Here are the key steps you should take to find and engage a CPA audit firm:

1. Define what you need for experience.

Depending on your industry, you may need a CPA partner with specialized accounting experience.

Give some thought to this, making sure to identify relevant drivers, such as working capital financing, prospective sale process, due diligence preparation, initial public offering, merger, estate planning, internal controls, and best practices advice.

Also think about whether your situation calls for local, regional, national, or international experience. This will help shape your pool of candidates.

2. Ask for referrals.

Reach out to your network – business advisors , bankers, investment bankers, venture capital firm professionals and industry peers’ financial leaders.

Ask them for recommendations for both audit partners as well as audit firms that meet the criteria you have set forth.

Have these contacts also review your criteria and make value-add suggestions – like cyber risk review, federal & local tax compliance & planning , ERP system assessments, etc., for all CPA firms under consideration.

Contact the applicable state board of public accountants to identify & assess any past or on-going complaints registered in the public record.

It is also a good idea at this point to confirm whether the local offices that will provide audit services have specific experience in audits for your industry.

3. Prepare a scorecard.

With all the data points you now have at your disposal, create a scorecard that allows you to objectively assess each potential CPA audit firm.

Make sure you build in weighted average calculations so that you end up with a single resulting score. Doing so provides you with an objective, rather than subjective, comparative measure.

4. Prepare an RFP.

Develop your formal Request for Proposal, which can be as simple as an email or as complex as a multi-page booklet.

There are a few key items that should be included in your RFP:

  • a business summary describing your business model and its go-to-market strategy
  • your customer base and competitors
  • bios for your owner/management leaders
  • at least two years’ historical financial statements
  • an interim current year financial statement
  • a forward-looking forecast, if available
  • a chart of accounts
  • two years’ worth of federal tax compliance reports
  • a corporate organizational chart that includes affiliated companies
  • your proposal submission target date and expected selection completion date
  • the primary contact person for questions

5. Conduct interviews.

Try to meet with as many different potential CPA firms as is reasonable.

Engaging with several different types of firms can help you clarify the best partner for your business.

During your interviews, make sure to ask about the firm’s service offerings, industry experience and schedule alignment.

It is important to make sure any potential partner offers what you need and can provide services within the timeframe you have mapped out.

In addition, use the scorecard you created in step three above to develop an objective assessment of each potential partner.

The firm with the highest weighted score, as long as you have determined that they have a good relationship fit with your business, should be your ideal partner.

If you would like outside support in choosing your CPA audit partner, our team of trusted family business advisors stands ready to lend their expertise. Reach out today to set up a consultation call. We are here to help.

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