issuing audited financials or comfort letters
Accounting professionals can become a CPA (Certified Public Accountant) through a combination of education, experience and examination. The existing accountant types are quite diverse. While tax accountants focus on the preparation and filing of taxes, others specialize in auditing, government, managerial, investments, consulting or international accounting.
However, not all CPAs can or should provide attestation services, such as issuing audited financials or comfort letters.
Not so often, but from time to time we would be asked to provide Audited or Reviewed financial statements along with a CPA letter and footnotes to certify, attest or guarantee some information as a CPA firm for a third party to make decisions. These third parties are usually bonding companies or lenders.
business decision making and tax compliance
As a tax based firm we (Schwartz & Associates) do prepare financial statements for business clients. However, the financial statements are only for business decision making and tax compliance.
Tax accountants follow tax laws and rules when preparing financials and tax returns, while corporate accountants and auditors must follow GAAP (generally accepted accounting principles) to prepare and issue accrual basis financial statements.
preparing a complete set of financial records (books)
Highly skilled tax accountants are retained for the purpose of looking out for the best interest of their tax paying clients. They take positions that prevent clients from overpaying taxes and in the meantime help increase clients’ net worth. Some tax accountants who also provide accounting and bookkeeping services can protect their clients from tax audits by preparing a complete set of financial records (books) that substantiates federal and state tax filings.
That being said, tax accountants are essentially somewhat biased and side with taxpayers. They must not be in a position to provide any statements requiring independence (being neutral) to a third party or the public.
When it comes to lending comfort letters, a credit-granting decision should be based on a lender’s exercise of due diligence in considering many factors rather than relying on a letter written by a tax CPA. After the 2008 financial crisis, only a few lenders still require comfort letters while most have been self-sufficient and independent with their decision processes.
how we can help
If you ever find yourself in a situation being asked to have your CPA issue a letter, feel free to reach out to us. We will help you through the process, not necessarily by providing you the letter but by helping you retrieve the records or proof to satisfy the needs of the third party.
HOW SCHWARTZ IS HELPING SOUTH JERSEY SMALL BUSINESS OWNERS
Navigating these legal changes and what it means for your small business in New Jersey can be one of the biggest challenges you face in the coming years. Fortunately, Schwartz & Associates is already familiar with relevant tax laws and regulations you need to comply with, including the impact of the Biden Administration's new tax proposals. The American Families Plan (AFP) and American Jobs Plan (AJP) will bring with them new taxes on businesses in the coming year, and Schwartz is prepared to ensure your South Jersey business is not only in compliance but maximizing its benefits.
Contact us for more insight into what these changes may mean for your business specifically and what we can do to ensure you're getting the most out of your deductions.
