The majority of business owners don’t typically seek audits. 

The case is that it usually appears the other way around. A bank or investor will request it, or perhaps you’re in the midst of a significant event, such as a sale or expansion, and all of a sudden the topic of audited financial statements comes up.

And this is exactly where the questions begin.

Do I actually require one? How long will it take and what will they be checking?

Being a little nervous about your first audit is quite a normal reaction. Though it is most important to know that once you understand the procedure and get started, it usually ends up feeling a lot less intimidating than you anticipated.

What will a Canadian financial statement audit entail?

At a basic level, a financial statement audit is the process of having someone who is an impartial third party examine your financial data. They don’t only peruse or read over the documents, but examine how the data was put together. 

After reviewing your financial statements, a CPA provides an assessment on their dependability. What matters to other people is that view. It is what a lender or investor considers when determining how much faith to put in your company.

In Canada, audits must adhere to a specific set of guidelines. Additionally, it does not matter if you understand the technical terms, as what truly matters is that the procedure undergone is both organized and reliable.

Simply put, an audit demonstrates that your financial statements have been examined and confirmed rather than merely assembled.

What does an auditor actually do during an audit?

This is a part within the process that people oftentimes overestimate.This is because they assume they will be going through every single transaction line by line.

In actuality, they focus on the areas of your finances where errors are most likely to occur through looking at samples, and asking questions. Most importantly, they’ll want to see the supporting documents behind certain numbers.

For example:

 

• • If your revenue had a significant increase this year, they’ll want to understand why

• • If your receivables are high, they may consider whether they’re actually collectible

You can expect a bit of back and forth to occur during this process, in which you send your documents, they’re reviewed, and they will report back with some follow-ups. This is all a usual part of the process.

There are occasionally questions posed to you regarding things you didn’t expect. It’s all part of the process.

Are quarterly financial statements audited?

For most businesses and a majority of firms, the answer is no.

Usually, audits are carried out once a year. For private businesses in Canada, such is also the norm.

Although it is quite uncommon for complete audits to arrive every quarter, quarterly accounts may be reviewed under certain circumstances, particularly for bigger corporations.

Rather than quarterly audits, small and mid-sized business owners nearly always deal with the case of annual audits.

If you’re running a small or medium-sized business, you’re almost always dealing with an annual audit, not quarterly ones.

Who usually needs financial statements to be audited?

In this case, things become a bit more situational and dependent on context.

Many small businesses don’t typically need an audit at all, at least they do not in the early years.

However, this changes due to many reasons.

Maybe you’re applying for a larger loan. Maybe you bring in an investor. Maybe your business structure becomes more complex.

This is typically when audits enter the picture.

Common triggers that initiate an audit being required:

 

• • A lender making it a condition of providing financing

• • Investors wanting more reliable and trustworthy financial information

• • Regulation requirements specific to your business sector or industry

• • Selling the business or going through due diligence for the company

If no one is relying heavily on your financial statements, an audit might not be necessary just yet. However, once all other parties start depending on your numbers, expectations will shift.

What precisely are audited financial statements?

From a format perspective, audited financial statements appear somewhat familiar. 

Your income statement, balance sheet, and other documents will still remain visible to you.

The difference, however, lies in the audit report that comes with them.

That report is what gives the statements their weight. It’s the CPA saying, in professional terms, that the financials are fairly presented, and that the perception of your numbers is altered by just one page.

Without it, your finances are just information. With it, they carry much credibility.

How long does a financial statement audit last?

The duration of a financial statement audit largely depends more on how you’re prepared for it, and your readiness.

Things run rather smoothly if your paperwork is tidy and well-organized. It will take longer if it is unclear or a mess. It simply operates that way.

For many businesses, the entire process takes a few weeks.

That isn’t all active work. Usually, there is some waiting. Once your paperwork is shared, they will be sure to carefully go over everything and get in touch if anything is unclear.

It is very common for this part of the process to perhaps take longer, depending on if certain items are missing or need to be cleared out.

What would the best option be? We’d say that before the auditing process even begins, make sure everything is in order.

Why should a small business get audited? What do they stand to gain?

Some business owners consider audits to be mandatory, and are also seen as helpful by others.

Both of these viewpoints are legitimate, however, practically speaking, audits aim to do the following:

They increase the credibility of your finances. The obvious one is that.

They also impose a certain amount of discipline. You tend to keep things tidy when you are aware that your numbers will be examined.

Audits can uncover issues you were unaware of. Although this part of the process may seem strange at first, you will be frequently assisted in resolving those problems.

Audited books provide a great opportunity for discussions to be held about expansions, funding, and partner acquisition.

How much do audits cost in Canada?

Much of the frustration faced by individuals comes from the fact that there is no set number.

Prices are based on:

 

• • The size of your company

• • How intricate your transactions are

• • How well-organized are your records?

Depending on how their accounting is run, two companies with comparable sales can have rather different audit fees.

The most costly kind of financial statement engagement is typically an audit. The CPA assumes greater responsibility and there is more work required.

Nevertheless, when there is a clear purpose for the audit, the expense usually makes more sense.

Do small businesses actually need audits?

Most don’t, at least not immediately.

Many companies begin with more basic reporting. That is entirely typical.

When the company reaches a particular level, an audit becomes essential. Usually when there are more stakes involved or when external parties are involved.

It’s more about how your financial statements are being used than it is about size.

So, what is a financial statement audit really about?

It boils down to one thing when all the technical jargon is removed.

assurance.

It’s not about improving the appearance of your numbers. It’s about ensuring that they are dependable.

That is really important to some firms. Eventually much later in the process, this becomes a significant factor for others.

Knowing when you’ve reached this particular moment is very crucial.

FAQs

What is a financial statement audit in Canada?

A CPA goes through your financial statements independently to make sure everything adds up and looks legit.

What does an auditor examine during an audit?

They look at selected transactions, supporting documents, and key areas where errors are more likely.

How long does a financial statement audit take?

Typically a few weeks—depends on your record-keeping and business complexity.

Who needs audited financial statements in Canada?

Individuals such as lenders, investors, regulators, as well as anyone who is seeking to trust your financials.

What are the benefits of an audit for small businesses?

Builds trust with others, sharpens your financial habits, and gives you solid confidence when dealing with banks, investors, or partners.

How much does an audit cost in Canada?

The cost of an audit varies based on the size and complexity of your particular case, though audits are generally the most expensive reporting option.

Why SRJ Assurance?

Most clients don’t come to us asking for an audit.

They come with a situation. A lender request. A growth plan. A decision they need to make.

We will provide you with the assistance needed that will allow you to figure out if an audit really makes sense for your situation right now—not just on paper, but in real life for your business.

We keep things straightforward, skip the fluff, and zero in on what actually matters to you.

Unsure if you need one or what it’s like? Happy to walk you through it.