Finance Blog A Closer Look at Financial Statements
A Closer Look at Financial Statements
Written by Larry Johnson Friday, 06 November 2009 16:23
There are three levels of Financial Statements. From highest to lowest value, they are: Audited Statements, Review Engagement (RE) and Notice to Reader.
At the high end, Audited Statements can be expensive. However, they are rarely required by lenders. At the lower end, lenders are very sceptical of the Notice to Reader financials. This is because the accountant often merely produces numbers requested of him by the client with very few, if any, checks on the validity or accuracy of the information. Review Engagement statements are the appropriate level for our clients.
RE statements are prepared by an accounting firm. The client benefits from having his accountant review his business and provide advice e.g., receivables taking too long to turn into cash; overspending on sales, etc. The accountant will also query his client to ensure that there is documentation to support the statements.
To provide optimum financing, lenders require a minimum RE Audited Statements would make it easier to find lending so if they are available, so much the better. But as a minimum, the RE financial statements are normally required.