Archive for the ‘Financial Statements’ Category

Auditing and Financial Statement Standards Update

Tuesday, February 5th, 2013

Authored By: Dustin Wood, CPA. Dustin has been with the firm 8 years and is the audit manager here at Cook Martin Poulson, PC. He specializes in financial statement services and preparation of tax-exempt information returns.

Clarified Auditing Standards
Clarified Auditing Standards have been issued by the AICPA Auditing Standards Board (ASB). There were only three standards issued that replace all existing auditing standards, but they contain a significant amount of detail in each standard. The standards are effective for periods ending after December 15, 2012. The most significant change stemming from issuance of the standards is revised wording for audit reports, engagement letters, and representation letters. Audit reports will now have sub-headings for each section of the report. The standards issued also require more communication between auditors in a group audit setting where auditors of a group use the work of other auditors.

Legal Representation Letters
Based on revisions to audit standards, there will not be as much emphasis placed on legal representation letters unless there is risk for an audit client (such as legal fees paid or litigation issues).

Comprehensive Income Presentation
According to Accounting Standards Update (ASU) No. 2011-12, details for changes in comprehensive income can no longer be presented as part of an equity statement and must be shown in a separate statement or as part of an income statement. This change is effective for periods ending after December 15, 2012.

Yellow Book Audits (subject to Government Auditing Standards)
Organizations must have management who can take responsibility for financial statements for auditors to maintain their independence. Management must also have the skills, knowledge, and experience to be able to accept the financial statements.

Posted in Blog, Financial Statements, Tax Tips | Comments Off

Financial Statement Service Levels

Monday, September 19th, 2011

Authored By:  Dustin Wood, CPA.  Dustin has been with the firm 7 years and is the audit manager here at Cook Martin Poulson, PC.  He specializes in financial statement services.

There are three basic service levels that CPAs perform with regard to financial statements.  In order from the lowest level to the highest level of assurance they are:  compilation, review, and audit engagements.

Compilation – No assurance  is provided in the accountant’s report as to whether the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP), however, known departures from GAAP require a modification to the accountant’s report.  Accountants are required to obtain knowledge of the accounting principles and practices of the client’s industry and a general understanding of the client’s business.  Note disclosures to the financial statements may be omitted and the accountant does not have to be independent of the client, but a lack of independence must be disclosed in the accountant’s report.  An engagement letter must be signed by the client as a written communication of the services to be performed.

Review – Limited assurance is provided in the accountant’s report as to whether the financial statements are presented in accordance with Generally Accepted Accounting Principles (GAAP) and known departures from GAAP require a modification to the accountant’s report.  Accountants are required to obtain the same knowledge of the client’s industry and business as in a compilation, but are also required to obtain an increased understanding of the client’s business.  Performance of inquiries and analytical procedures is required as well as additional procedures if questions arise in performing the review.  Note disclosures to the financial statements are required and accountants must be independent of the client.  An engagement letter and management representation letter must be signed by the client.

Audit – An auditor’s opinion is provided stating that the financial statements are fairly presented in accordance with GAAP and inadequate disclosure and/or departures from GAAP require a modification of the auditor’s opinion.  The auditor must obtain an extensive knowledge of the economy, relevant industry, and the client’s business.  Inquiry, analytical procedures, obtaining an understanding of internal control, and other audit procedures are required.  Accountants must be independent to perform an audit of financial statements.  An engagement letter and management representation letter must be signed by the client.

Costs for the services vary based on the work required to be performed and the time necessary to complete the services, with compilations being the least costly and audits being the most expensive level of service.  Please contact us to obtain more information regarding these services or if you need a price quote for services to be performed.

Posted in Blog, Financial Statements | No Comments »

Dairy Accounting and Figuring Out Your CWT

Wednesday, January 13th, 2010
Nathan Shields, CPA, MAcc. This will be Nathan’s 3rd tax season with CMP. Nathan specializes in tax compliance, tax planning, and financial statement preparation. Nathan is an expert with Dairy accounting and taxation.

Most dairy farmers can tell you immediately what the price of milk was on their last milk check, and what they are expecting the price of milk to be on their next milk check. Dairymen calculate their milk price based on the cost per hundred weight or CWT. To get the CWT take the total dollar amount received divided by the total pounds of milk produced and multiply by 100. This formula is important because it allows the dairyman to compare all the revenues and costs based on the CWT basis.

Feed is the single largest cost and it is crucial to a dairy’s profitability. It is important for the dairyman to know how much their feed cost is. Just as quickly as a dairyman can tell you what the price of milk is, he can tell you what the cost of feed is. This year I noticed milk prices fell at the same time feed was at its highest. As I prepared financial statements for some of our clients I was surprised when I would see the CWT of feed compared to the CWT of milk. Often times it was 90% to 100% or more per the CWT of milk. While a dairyman can’t control the price of feed (or milk) it is still important be aware of what the feed cost is relative to the milk price.

In fact, it is crucial to stay on top of the cost of production. I would assume most dairy’s are milking at or near full capacity, which means they are getting as much milk as they are capable of getting and the dairyman has little influence over the price of milk. A dairyman does have influence over the cost of producing that milk. I know one dairyman who switched to a “just in time” supply of veterinary supplies. By buying only the supplies that were currently needed and paying for them immediately he was able to cut the CWT for veterinary supplies in half without affecting production. These are the types of things that will keep a dairy surviving the tough times and thriving in the better times.

It is fairly simple to compare CWT at any time. Most of our clients use QuickBooks, so by using the program features of Quickbooks we have been able to help clients prepare reports calculating CWT per line item on the income statement. A few things to consider when comparing and looking at the CWT is the change in feed inventory, change in the herd size, and depreciation. These must be considered to get the most accurate CWT amounts, and the most accurate cost of production.

We are happy to assist dairyman setup and prepare reports reporting their critical production numbers on a CWT basis. Please contact Dan Smith or myself Nathan Shields in the Logan office for assistance.

Posted in Financial Statements | No Comments »

Why Do Banks Want Financials?

Monday, December 28th, 2009
Authored by Scott R Coleman, CPA. Scott is a manager over the audit and financial statement division of the Logan office.

As lending and financial resources have tightened over the last several years, lenders have increased the financial reporting required of their customers. We have seen an increasing number of financial institutions require reviewed or audited financial statements, where in the past a compilation of a financial statement may have been sufficient. The differences between an audit, review, and compilation are significant, and can be summarized as follows:
  • Audit (highest level of assurance): An audit is a methodical review and objective examination of the financial statements, including the verification of specific information, as determined by the auditor or as established by general practice.
  • Review (limited assurance): A review is a less extensive analysis of the financial statements and your company’s management team. While not as formal, nor as thorough as a full audit, it can still provide a good verification of financial accuracy.
  • Compilation (lowest level of assurance): A compilation is a simple preparation of standard financial statements, using business-provided data and following standard accounting principles. A compilation does not include any analysis or verification.

Since there is a significant difference in the amount of work to be performed for each level of service there is also a difference in price and time to complete the engagement (both time from an accountant, and time that a borrower must invest as well). For more details, please contact us to discuss how we can help you, or refer someone who can.
Not only have reporting requirements for existing loans been made more onerous, but obtaining a loan in the first place can be very difficult at best. Requesting a business loan without adequate preparation sends a clear message to the lender: High Risk! Therefore, it pays to be prepared and organized in your approach for financing. Put your best foot forward by preparing a winning loan proposal.

A winning loan proposal includes:

  • Executive Summary: Concisely state the purpose of the loan, the exact amount of money required, an explanation of what the loan will be used for and why it’s needed.

  • Pro-forma Cash Budgets and Financial Statements: Prepare information that your banker can easily read and buy in to.
  • Owners Personal Financial Statements: Make copies of the last three years of personal tax returns for the bank as well as identify the collateral being pledged as security for the loan.

  • Representation: Substantiate your financial needs/position to your banker in person.
For more details, please contact us to discuss how we can help you, or refer someone who can.

Posted in Financial Statements | No Comments »

 

quoteCook Martin Poulson amended my taxes and got me several thousand dollars in a refund.quote

Rob Corcoran
Influence Real Estate
Ask UsCHANCES ARE, WE CAN HELP YOU TOO.

Cook Martin Poulson – Utah CPA Firm with Accounting Awesomeness.

Cook Martin Poulson is a full-service Utah CPA and business development firm with locations serving Logan, Salt Lake City and their surrounding areas.

CMP is comprised of a team of awesomely experienced CPAs, Staff Accountants and Paraprofessionals—offering a wide range of professional services, including Accountant Expertise, Payroll, Bookkeeping Services, Financial Statements, CFO Outsourced Solutions and Estate and Succession Planning.

CMP’s Logan Accountants conveniently provide Proactive Income Tax and other services for individuals living in Northern Utah and Southern Idaho, and our Salt Lake City Accountants also specialize in Income Tax and Business Bookkeeping in Salt Lake City and the Greater Wasatch Front.

Cook Martin Poulson offers excellent customer service, creating long-lasting relationships with its clients, which has earned it the reputation of the place to go for awesome, friendly and caring business and financial expertise.