Whether you're preparing for your first audit as a newly public company or switching auditors as a private business, knowing what a financial statement audit actually involves helps you prepare, budget your team's time, and choose the right firm.
What a Financial Statement Audit Is
A financial statement audit is an independent examination of a company's financial statements: balance sheet, income statement, cash flow statement, and related disclosures, resulting in an auditor's opinion on whether those statements are presented fairly, in all material respects, in accordance with the applicable financial reporting framework (typically U.S. GAAP).
For public companies and SEC registrants, this audit must be performed by a firm registered with the PCAOB and follows PCAOB auditing standards. Private companies typically engage firms operating under AICPA standards, though many private companies with public aspirations or sophisticated investors choose PCAOB-registered firms from the outset.
What's Included in Financial Statement Audit Services
Planning and risk assessment: understanding your business, industry, and the areas most susceptible to material misstatement
Internal control evaluation: assessing relevant controls to determine how much the audit team can rely on them
Substantive testing: verifying account balances, transactions, and disclosures through methods like confirmations, recalculations, and analytical review
Review of significant estimates and judgments: areas like revenue recognition, stock compensation, goodwill, and fair value measurements often receive elevated scrutiny
Communication with those charged with governance: audit committees and boards receive updates on significant findings, judgments, and any disagreements with management
Issuance of the auditor's report: the formal opinion attached to your financial statements
Types of Engagements Beyond a Full Audit
Not every company needs a full audit every year. Related assurance services include reviews (limited assurance, less testing than a full audit) and compilations (no assurance, primarily formatting management's financial data). Public companies and most SEC registrants require full audits, but growing private companies sometimes start with a review before stepping up to a full audit as investor or lender requirements increase.
What Makes an Audit Go Smoothly
A well-organized PBC (provided by client) list, delivered on time rather than piecemeal
Reconciled account balances before fieldwork begins, not during it
Clear documentation of significant judgments and estimates
Responsive points of contact who can answer auditor questions without lengthy delays
Reliable internal controls, which reduce how much substantive testing the audit team needs to perform
Companies that treat the audit as a once-a-year fire drill tend to see higher fees, more findings, and more stress. Companies that maintain audit-ready books year-round see the opposite.
Choosing an Audit Firm
For growth-stage and public companies, the right audit firm combines technical credentials (independent PCAOB registration, relevant industry experience) with a service model that fits your size. Partner-led engagements, where a partner is genuinely involved day to day, not just signing the opinion, tend to produce faster issue resolution and a better working relationship than engagements staffed primarily by rotating junior teams.
Talk to an Audit Partner
MBP Global delivers institutional-quality financial statement audits for public and private companies across more than 50 industries, with a partner-led model built for the growth-stage market.
Talk to a Partner about your audit needs, or explore our Audit & Assurance Services.
