THe USA Audit REQUIREMENTS and the resulting statements are a great way to bring about significant improvements for your organization.
Many organizations conduct periodic audits in order to improve their organizational health. Companies that manage large retirement funds for employees and public companies as well as companies that are privately owned and controlled by non-profits, may be required to submit annual audited statements in order to comply with regulations and provide adequate financial disclosures.
USA Audit Requirements for Public Companies
Any company that is publicly traded is one that is listed on an exchange that allows it to sell shares. The U.S. Securities and Exchange Commission must receive a Schedule 10-K every year from publicly traded companies. Investors and regulators can access the 10-K to get a review of the previous year. It also details the company’s financial situation and long-term outlook.
AUDITED FINANCIAL STATEMENTS ARE REQUIRED IN ORDER TO COMPLETE THE 10-K.
Audited financial statements are required to assure that the public is completely satisfied with the accuracy of information released by public businesses. This is essential because the public will not be able to verify the information otherwise. Public companies are also required to submit quarterly reports or 10-Qs. However, this form doesn’t require audited financial statements.
USA Audit Requirements for Private Businesses
Although private companies are not required to submit audited financial statements by law, best practices and contractual obligations could require small businesses to do so.
This is to ensure the company’s financial health.
Companies that want to borrow money or have one may need to submit annual audited statements.
Audited financial statements may also be required by outside investors, who are not involved in the business’s day-to-day operations, to provide reliable information about the company’s financial condition.
USA Audit Requirements for Large Retirement Funds
No matter whether a company is public or private, it may be required to audit any retirement fund that it sponsors. An employer who sponsors a large retirement plan must file Form 5500 annually with the Internal Revenue Service. A large retirement plan means one with at least 100 members.
The sponsoring company must prepare Form 5500, which requires them to audit the financial statements that detail the assets of the retirement plan, the contributions the plan made during the year, as well as the investment income earned by the plan. The statement must also be prepared by an auditor who will disclose any federal compliance issues regarding the administration of the plan.
USA Audit Requirements for Non-Profits
Nonprofits are businesses that serve a public purpose and do not generate income for their owners. These entities are frequently regulated by state and federal statutes.
Two reasons could lead to a nonprofit needing annual audited statements.
- If the organization is subsidized by a government agency or private donor, the first reason may be that it must provide annual audited statements. Sometimes donors require annual audited statements in order to verify that funds are being used according to donors’ intentions.
- Second, to comply with state law. Some states require that charities licensed to operate within their territory file financial statements each year.
Nonprofits exist to serve society and so are held to higher standards than for-profits. They are often not required to publish their financial statements, tax returns, or financial performance information.
An independent, external audit of the nonprofit’s finances is one of the most important components of this “higher level” standard. An audit certifies that financial information is accurate and helps donors feel more confident that funds are being used appropriately. It also ensures that there is sufficient internal control to prevent funds from being misused. Not every nonprofit should be audited.
The requirement for an independent, external audit is usually determined by the location of your organization, whether it meets certain criteria, donor requirements, Board mandates or any combination thereof. Here are some guidelines for when an audit of your nonprofit might be required.
At the country level, some countries require an audit, regardless of whether they meet any thresholds or satisfy any criteria. The audit is not required by the Internal Revenue Service (IRS), the United States.
At the state level, some states in the United States require nonprofits to submit audited financial statements to allow them to participate in fundraising activities. Some states also require audits when an organization receives federal or state funding. The National Council for Nonprofits keeps an up-to-date list of audits that are required by each state.
Donors may require an audit. Independent audits may be required by donors. Additionally, any organization receiving funds from the US federal government or state governments may need to submit an independent audit.
The Board of Directors of nonprofits may require that the organization undergo an external audit as part of its fiduciary responsibilities. Some organizations may also be required to undergo an audit as part of their internal control over the accuracy and financial reporting.
Summarising, Does Your Business Need an Audit
Audits offer the chance for an additional set of eyes, usually those of a certified professional accountant, to look over your company’s financial statements. Investors and lenders may require an annual audit of your company before they will lend money to the business.
CPA auditors offer a few useful services to your business
The US CPA auditors will give your business a physical exam every year. An audit exam can uncover issues that your business didn’t know about. Knowing that auditors visit once a year to inspect your business keeps you on your toes.
After an audit, the CPA will prepare a brief report that indicates whether the company has prepared its financial reports according to U.S. accounting and reporting standards.
YOUR BUSINESS’S PUBLIC OR PRIVATE STATUS WILL AFFECT THE AUDIT REQUIREMENTS.
Public sector employees whose debt securities (stock shares or bonds) are held in ownership must have an annual audit by an independent CPA firm. Audits are required by federal securities laws 1933 and 1934.
Private sector: Although federal law does not require audits of private businesses, banks, lenders and other private business creditors may insist that audited financial statements be prepared.