Audit and Attestation Services

Audit and attestation services from a California CPA firm come in levels, and choosing the level is the decision that matters. A compilation, a review and an audit are not degrees of care applied to the same piece of work. They are different amounts of assurance, at materially different costs, and they satisfy different requirements.

Most companies asking about an audit do not actually need one. Determining which level of service satisfies the requirement (and saying so even when the more expensive option was already assumed) is the first useful thing this engagement does.

Audit and attestation services a California CPA firm can issue, and which you need

They differ in the amount of work performed and, correspondingly, in the level of assurance the report conveys.

Compilation

Financial statements are presented in the correct form from information you provide. No assurance is expressed, no verification is performed. Appropriate for internal use, or where a lender has specifically said a compilation is acceptable. Fast and inexpensive.

Review

Analytical procedures and enquiry, producing limited assurance, a conclusion that nothing came to our attention suggesting the statements are materially misstated. This is the level most private-company lender covenants actually require, and the level most often over-bought.

Audit

Substantive testing, third-party confirmation, evaluation of internal control relevant to the audit, and an opinion providing reasonable assurance. Required for most institutional investors, larger credit facilities, many regulatory filings, and any situation where an outside party's exposure is significant.

Agreed-upon procedures

Specific procedures, defined by you and the party relying on the result, with findings reported factually and no opinion expressed. Useful for a narrow question (verifying a royalty calculation, testing a specific covenant, confirming a schedule in a purchase agreement) where a full audit would be disproportionate.

A practical note that saves money more often than any other advice on this page: read the actual covenant language before commissioning anything. Loan agreements frequently say "reviewed financial statements" and are read as requiring an audit, at roughly three times the cost.

Employee benefit plan audits

A plan with 100 or more eligible participants generally requires an annual audit filed with Form 5500. This is a specialised area with its own failure modes, and it is one where the Department of Labor has been publicly critical of audit quality across the profession.

The recurring findings are consistent: participant eligibility not tested against the plan document, employee deferrals not remitted within the required timeframe, compensation definitions applied inconsistently between payroll and the plan, and reliance on a custodian's certification broader than the certification actually supports.

Plan sponsors are frequently unaware that late remittance of deferrals is a prohibited transaction requiring correction and reporting, regardless of how brief the delay was or whether any participant was harmed.

What the process looks like from your side

The single largest determinant of how painful an audit is (and how much it costs) is the state of your workpapers before fieldwork begins. An audit where every account reconciliation exists, is current, and ties to the general ledger runs efficiently. One where reconciliations are prepared in response to the auditor's request does not, and the additional time is billed.

A prepared-by-client list is issued well before fieldwork and is deliberately specific. Where a company is undertaking a first audit, that list arrives early enough to be a work plan rather than a surprise, and the controller-level support to complete it is available separately, subject to the independence rules described below.

Independence, stated up front, every time

AICPA independence requirements restrict what a firm performing an attestation engagement may also do for the same client. Bookkeeping, management functions and certain advisory services can impair independence in fact or in appearance, and once impaired the opinion is not usable.

The consequence is simple and is agreed in writing before an engagement letter is signed: this practice will either perform your attestation work, or perform the non-attest work around it. Not both. Where a conflict exists, you will be told which service to take elsewhere, and, where it helps, who is competent to provide it.