The reports rendered by the CPA on the financial statements are generally at one of three levels: • An Audit. A positive assertion on financial statements that the financial statements do or do not present fairly the financial position, results of operations, and cash flows in accordance with generally accepted accounting principles or another comprehensive basis of accounting consistently applied. • A Review. Limited assurance that nothing came to the accountant’s attention to indicate the statements were not in accordance with generally accepted accounting principles or another comprehensive basis of accounting. • A Compilation. An indication that the financial statements were compiled from information represented by management and that no assurance is given on them. The level of reporting plays a significant role because it indicates the degree of assurance that the CPA is rendering on the financial statements. Where a business has borrowed from a financial institution, the size of the debt will usually dictate what level of assurance the bank would like to see. Tax-Related Services The entrepreneur often doesn’t realize that tax planning is a source of business capital. Careful planning and the use of a CPA can enhance this source of funds. Income taxes must be paid on business profits; hence, they are expenses of a business. These income taxes, if properly planned, can be kept to a minimum, thus leaving cash available for financing your business. In addition, if a business should fail, you will want the most advantageous treatment of these losses. The CPA must always be aware of current changes in the tax law and can provide the proper vehicle for making the most of this source of funds. For example, the CPA can: assist in structuring the initial organization of proprietorships, partnerships (whether general, limited or limited liability) or corporations; assist in structuring a possible tax-free incorporation; assist in structuring business purchase, sale or liquidation transactions; prepare various compliance tax reports, such as individual, partnership and corporate income tax, payroll, sales tax, property taxes; handle tax examinations and tax planning strategies; assist in estate planning and personal tax planning; and assist in the implementation of executive compensation, retirement plans and employee benefit programs.
Financial Planning and Consulting Services A CPA can assist a business:
• in choosing the form of business organization • setting up an accounting system and procedures • defining and obtaining reporting, operational and cost control needs
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