Category

CPA Reviews and Audits in Construction

Introduction

Financial reviews and audits are more than just regulatory compliance for construction companies; they are a cornerstone of bonding success. Understanding these processes is crucial for any construction business looking to secure bonds.

Financial Reviews vs. Audits

While both provide insight into a company’s financial health, audits offer a more in-depth examination than reviews. However, both are essential in demonstrating your company’s reliability and stability to bonding companies.

If the stakeholders are satisfied with limited assurance and a less detailed examination, a review might suffice. However, for full assurance and a detailed examination of the financial statements, an audit is necessary. Each serves a different purpose and comes with its own set of procedures, costs, and time requirements.

CPA Construction
The Role of the Percentage of Completion Method

This accounting method, which recognizes revenue based on the project’s progress, offers a realistic view of financial health. It’s particularly beneficial during financial reviews and audits, showcasing your company’s ongoing profitability and stability.

An accounting technique used to recognize revenue and expenses on long-term contracts. It’s particularly common in industries like construction, engineering, and any sector involving large projects that span over multiple accounting periods. This method provides a more accurate financial picture of the project’s progress, compared to recognizing all revenue and expenses at the end of the project.

Preparing for a Financial Review or Audit
  • Accurate Bookkeeping: Ensure all financial transactions are recorded accurately.
  • Documentation: Keep detailed records of contracts, expenses, and revenues.
  • Adopt the Right Accounting Methods: Utilize the percentage of completion method for a true financial picture.