How Much Should a Reviewed Financial Statement Cost?

Reviewed financial statements are a critical component for businesses of all sizes. They provide an independent verification of the accuracy of your company's financial information, ensuring compliance with regulatory requirements and building investor confidence. The cost of these statements can vary widely, typically ranging from $1,200 to $5,000, depending on the size and complexity of your business. Below, we explore the factors that influence these costs and provide a detailed breakdown of the typical process and expenses involved.

The Factors Affecting Cost

The cost of reviewed financial statements depends on several factors, including the size and complexity of your company, the level of risk, the existing internal control processes, and the amount of assistance you provide to the auditors. Generally, the more complex your business operations, the higher the cost of the review.

Size and Complexity

For smaller businesses with fewer employees (10 to 75) and less complex operations, the cost of a reviewed financial statement might be around $1,200. However, for larger companies or those with more intricate financial operations, the cost can escalate to $5,000 or more. The complexity can include multiple subsidiaries, cross-border transactions, or specialized industries that require additional scrutiny.

Risk and Existing Internal Controls

The level of risk in your business also impacts the cost. If your company has a higher risk profile due to irregular transactions, lack of transparency, or historical issues, you may need more thorough audits, driving up the cost. Conversely, if you have robust internal controls and a history of accurate financial reporting, the audit process may be more straightforward and less costly.

The Audit Process and Costs Breakdown

A typical audit process involves a team of auditors who conduct a thorough review of your financial records. The exact number of auditors and the duration of the audit depend on the size and complexity of your business. Here’s a more detailed breakdown:

Manpower and Time Requirements

Two Auditors: Two auditors are usually required for the detailed verification of your financial statements. These auditors will spend two weeks working on the review, requiring a significant amount of their time. A Manager: A manager will oversee the auditors' work for a period of five days, ensuring that the process is being conducted efficiently and effectively. A Partner: A partner from the auditing firm will supervise the entire process and provide guidance and oversight. This partner will typically be involved for two days.

Fee Structure

Based on the hourly rates of the auditors, managers, and partners, the total cost can be substantial. Here’s an example calculation for a small to medium-sized business:

Two Auditors: $150 per hour x 80 hours (2 weeks) x 2 $24,000

Manager: $225 per hour x 40 hours (5 days) $9,000

Partner: $325 per hour x 40 hours (2 days) $5,000

Total Cost: $24,000 $9,000 $5,000 $38,000

Additional Fees

Additional fees can apply for specialized audits, such as 401(k) audits. These fees can range from $5,500 to $10,000, depending on the complexity of the 401(k) plan and the level of audit required.

What to Expect During the Audit

During the audit process, the auditors will perform a series of checks and verifications to ensure the accuracy of your financial statements. This may involve:

Independent confirmation of balance of cash accounts Review of bank reconciliations and investment accounts Statement from your attorneys Witnessed physical count of inventory List of every fixed asset by purchase date and accumulated depreciation Reconciling roll-forward of assets and accumulated depreciation Copy of every sales contract and service contract Board minutes Listing of all accounts receivable with aged detail on large payments and receipts Cash info for 15 days each side of year-end Aging of accounts receivable Copy of each note payable and a listing of all notes payable Insurance policies and payments Operating metrics that support the revenue process Quarterly wage and tax reports reconciled to the ledger Large and randomly selected sample of accounts payable vouchers Calculations of costs of goods sold or cost of services Other detailed and/or original documents deemed appropriate for the type of business

This comprehensive review ensures that your financial statements are accurate, compliant, and provide a true and fair view of your business operations. While the process can be time-consuming and may involve significant financial investment, the benefits of a thorough audit often outweigh the costs in the long run.

Conclusion

The cost of reviewed financial statements is an important consideration for businesses of all sizes. While the cost can be substantial, the benefits of a thorough audit, including increased transparency, compliance, and investor confidence, make it a worthwhile investment. Understanding the factors that influence the cost and the detailed process involved can help you make an informed decision about the audit process for your business.