FAQ About a CPA Firm

Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA. In most states, only licensed CPAs are able to provide to the public attestation (including auditing) opinions on financial statements.

CPAs function as independent auditors and act as advisors to individuals, businesses, financial institutions, nonprofit organizations, and government agencies on a wide range of finance and tax-related matters.

To qualify for certification and a state license, an individual generally must:

  • Have a college degree or its equivalent
  • Pass the rigorous uniform CPA Examination
  • Meet certain experience or postgraduate study requirements
  • Meet annual continuing education requirements
  • Adhere to certain ethical standards and codes of professional conduct established by governmental bodies and peer organizations

The CPA plays an important role in business and the economy. Possessing technical knowledge and skills, the CPA is trained to apply sound judgment in business situations, helping people and organizations evaluate the use of economic resources. Today’s CPA provides a wide range of services to various sectors including, but not limited to, the business and corporate industry, government and nonprofit organizations, playing many roles such as:

  • Auditor
  • Educators
  • Management Consultants
  • Personal Financial Representative
  • Tax Advisor
  • Technology Consultant

A CPA can provide the following financial statement services:

  • Preparation – Intended for business owner’s use only to manage the business (similar to what an in-house controller or CFO would provide for management in a larger company). This can be shared with outside parties but on each page, the CPA will include a notice that “No Assurance Is Provided” on the financial statements. The CPA will not verify the accuracy or completeness of the information and is not required to issue a formal report on the financial statements.
  • Compilation – Intended for use by lenders and other outside parties who may appreciate the business’s association with a CPA without requiring a level of assurance on the accuracy of the financial statements. The CPA is required to read the financial statements in light of the financial reporting framework being used and consider whether the financial statements appear appropriate in the form and are free from obvious material misstatements. The compilation report is the first page before the actual financial statements and is written by the CPA on his or her firm’s letterhead. The compilation report states that the CPA did not audit or review the financial statements and accordingly does not express an opinion, a conclusion or provide any assurance on them.
  • Review – Intended for use by lenders and other outside parties with a basic level of assurance on the accuracy of financial statements. The review service is one in which the CPA performs analytical procedures, inquiries, and other procedures to obtain “limited assurance” on the financial statements and is intended to provide a user with a level of comfort on their accuracy. The review is a base level of CPA assurance services. The CPA will issue a formal review report that includes a conclusion as to whether, based on the review, he or she is aware of any material modifications that should be made to the financial statements in order for them to be in accordance with the applicable financial reporting framework. A CPA must be Independent from the company, the owner, and management to perform a review engagement.
  • Audit – Intended to provide creditors, investors, and other outside parties with a high level of comfort on the accuracy of the financial statements. In an audit, the CPA is required to obtain an understanding of the business’s internal control and assess fraud risk. In addition, the CPA is also required to corroborate the amounts and disclosures included in the financials statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures, and other procedures. The CPA will issue a formal audit report that expresses an opinion on whether the financial statements are presented fairly, in all material aspects, in accordance with applicable financial reporting framework. In addition, the CPA is required to report on any significant or material weaknesses in the system of internal control that are identified during the audit. A CPA must be Independent from the company, the owner, and management to perform a review engagement.
  • Individuals: April 15
  • Partnerships & LLCs: March 15
  • S-Corporations: March 15
  • C-Corporations: April 15 (December Year End)
  • C-Corporations: 15th Day of 3rd Month after Year End (Other Than December Y/E)
  • Trust and Estates: April 15

Extensions are available and will extend the date to file the return for an additional six months; however the extension to file is not an extension to pay.

We recommend keeping all tax returns and the support for the income and deductions claimed on those returns for 7 years after the date the return was filed. Before disposing of returns and supporting documents, each client should review other agencies that rely on these returns, such as Social Security Administration. Other documents and returns that should be kept permanently are:

  • Tax Returns with reported Net Operating Loss (NOL) that is carried forward. Return should be kept with the return that fully utilized the NOL for 5 years after the last return was filed.
  • Original purchase escrow documents of all real estate for 5 years after the sale of that property is reported on a tax return. This includes all documents and receipts for property improvements while the property was owned.
  • Property and business appraisals for five years after the sale is reported on a tax return.

As a new tax client to our firm, we would like to have the last filed tax return, federal and state, along with all depreciation schedules. The last two previous returns would be preferred, but one is sufficient. The previous year is requested because there are carryovers from one year to the next and this information helps our CPAs gain an understanding of how your returns were filed in the past.

If you are a returning client, please take time to review the tax organizer received from our firm. It asks questions that will let us know what has changed in your life that will affect your tax filing. It will also remind you of the tax documents and information we used to prepare your previous return. Whether or not you return your completed organizer, please bring the following to your appointment:

All tax documents received in January and February along with annual accounting of businesses including but not limited to:

  • Forms W-2, 1099, 1098, and 1095
  • 1099 Investment Statements including stock sale stock basis information if not on 1099
  • Rental Real Estate Profit and Loss of rental income and categorized expenses paid along with improvement information including description, amount and date placed in service.
  • Business Profit and Loss including revenue and categorized expenses paid along with fixed asset addition information including description, amount, and date placed in service.
  • Itemized deduction totals for Medical expenses by prescriptions, doctors, insurance, and hospitals, chartable donations paid in cash by charity and donations of items given to charity with description and approximate thrift store value by charity, taxes paid during year including state income tax, sales tax, property tax and DMV vehicle registration fees, and mortgage interest paid not reported on form 1098.
  • Final Closing Escrow document with amounts for the purchase or refinance of all real estate transactions.
  • Unreimbursed employee business expenses.
  • Vehicle mileage information for business use or unreimbursed business expenses.

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