When you need an audit
When private companies need an audit or review
Private companies usually need audited or reviewed financial statements because someone outside the company asks for them: an investor, a crowdfunding platform, a lender, a regulator or an acquirer. Here's what each one typically requires.
| Who's asking | What they usually need | Jump to |
|---|---|---|
| Investors and fundraising (angels, VCs, priced rounds) | Often reviewed or audited financials, depending on the round and investor | Jump to section ↓ |
| Crowdfunding platforms (Reg CF) | Reviewed or audited financials, depending on how much you raise | Jump to section ↓ |
| Reg A+ offerings | Audited financials for Tier 2 | Jump to section ↓ |
| Banks and lenders (loans, lines of credit, covenants) | Reviewed or audited financials, as set out in your loan agreement | Jump to section ↓ |
| Franchise buyers and regulators (FDD) | Audited financials of the franchisor | Jump to section ↓ |
| License applications and renewals | Audited or reviewed financials, depending on the regulator | Jump to section ↓ |
| Acquirers and sellers (M&A) | Audited financials, quality of earnings or financial due diligence | Jump to section ↓ |
| Boards and shareholders | Often reviewed or audited financials under shareholder or investor agreements | Jump to section ↓ |
Investors and fundraising (angels, VCs, priced rounds)
Often reviewed or audited financials, depending on the round and investor
Crowdfunding platforms (Reg CF)
Reviewed or audited financials, depending on how much you raise
Reg A+ offerings
Audited financials for Tier 2
Banks and lenders (loans, lines of credit, covenants)
Reviewed or audited financials, as set out in your loan agreement
Franchise buyers and regulators (FDD)
Audited financials of the franchisor
License applications and renewals
Audited or reviewed financials, depending on the regulator
Acquirers and sellers (M&A)
Audited financials, quality of earnings or financial due diligence
Boards and shareholders
Often reviewed or audited financials under shareholder or investor agreements
Fundraising and investors
Do investors require audited financial statements?
Some do. Angel and seed investors may accept unaudited numbers, but priced rounds, institutional investors and shareholder agreements often require reviewed or audited financial statements. Your term sheet or investor agreement will say.
Reg CF audits and reviews
Do I need a review or an audit for Reg CF?
It depends on how much you're raising in a 12-month period. Raises up to $1.235M need reviewed financials, and larger raises up to $5M need audited financials. Tell us your target raise and we'll confirm exactly what you need.
Which platforms do you work with?
We work with founders raising on any platform, including Wefunder, Republic, DealMaker, Dalmore-supported offerings and other platforms.
Two-year reviews start at $3,000. Two-year audits start at $6,000.*
* Inquire with Alice.CPA for a formal quote for your business.
Reg A+ audits
Do I need an audit for Reg A+?
For Tier 2, yes: your offering circular must include audited financial statements. For Tier 1, audited statements are required only if you already have them. We'll confirm what your offering needs.
Two-year audits start at $6,000.*
* Inquire with Alice.CPA for a formal quote for your business.
Audits and reviews for bank loans and lenders
Why is my bank asking for audited or reviewed financial statements?
Lenders often require reviewed or audited financial statements before approving a loan or line of credit, and again every year as a loan covenant. Your loan agreement says which type you need and when it's due.
Does my lender need a review or an audit?
Check your loan agreement or term sheet for the words “reviewed” or “audited.” Smaller loans often accept a review, and larger ones usually require an audit. Send us the covenant language and we'll confirm what you need.
When are covenant financial statements due?
Loan agreements usually set a deadline after your fiscal year-end, often 90 to 120 days. Reach out early so we can schedule your review or audit around that date.
Can you help with other lender requests?
Yes. Some lenders ask for agreed-upon procedures on specific items, such as a borrowing base or covenant calculation, instead of a full review or audit. We can scope that too.
Do you work with small businesses, not just startups?
Yes. We work with established small and mid-sized businesses as well as venture-backed startups.
Franchise (FDD) audits
Do you work with first-time franchisors?
We audit franchisors, including first-time franchisors, and work to your registration and annual renewal deadlines.
Can new franchisors phase in audited statements?
New franchisors may be able to phase in audited statements, meaning you may not need an audit immediately! We'll confirm what your FDD and the states you register in require.
Audits for license applications
Does my regulator need an audit or a review?
Audited or reviewed financials, depending on the regulator.
How do we confirm what our application needs?
Send us the application instructions and we'll confirm what you need.
M&A due diligence and quality of earnings
What does financial due diligence include?
Before you buy or sell a business, we check that the numbers behind the deal hold up: historical financial statements, revenue and customer data, working capital, debt and other obligations, and anything that could affect the price or terms.
What is a quality of earnings (QoE) report?
A quality of earnings analysis shows how much of a company's reported profit is real, recurring and likely to continue. We adjust for one-time, non-recurring and owner-related items to arrive at normalized EBITDA. Buyers use it to check what they're paying for, sellers use it to support their price, and lenders often require one to finance an acquisition.
Is due diligence or a QoE the same as an audit?
No. Both focus on the questions that matter for a specific deal, on the buyer's or seller's timeline. An audit gives an opinion on the financial statements as a whole.
Not sure what you need?
Send us the request you received, whether it's a term sheet, loan agreement, license instructions or platform requirements, and we'll tell you whether you need a review or an audit before we quote.
Email info@alice.cpa