This type of financial report is needed in various cases, such as when you want to apply for a loan, get funds from investors, provide data about finance to shareholders, and more. In addition, getting a Notice to Reader financial statements is necessary whenever there is an external party. In the following article, we will introduce you to some of the most important details related to this report.
This report represents financial details related to your business. Therefore, it must be accurate and up to date. Also, it represents a combination of financial details provided by the management department and sorted out by the accountants. It is the first step in getting trust from another party, which can be getting a bank loan or more funds from new investors.
However, it is not the final step in providing accurate details about your financial situation. It is common that parties might also need Audited Review or Review Engagement to prove that the details you provided in this report are accurate.
Why Is It Important?
This report is necessary in cases where you need to provide credibility about your businesses when you want to collaborate with another party. In some cases, even the owner of the business might want to have a notice to reader and prepare it with other documents in case there is an investor interested in funding a company.
Moreover, it is an essential part of the process when you want to get a loan for your business. Financial institutions are using it as a way to evaluate whether your company is reliable enough to get a loan. Every investor will need this report. There are some other documents common for bigger companies, but when it comes to smaller businesses and start-ups, it is common that investors will only require the Notice to Reader.
The same report is needed when you want to sell your business. In most cases, you will need a financial statement related to the previous five years. It can also help you when you are filling taxes. When this report is accurate, you can prevent overpaying your taxes.
Who Can Sign This Report?
It is important to know that you won’t be able to create this financial report and use it as a reliable document. An external professional must check the report and decide whether it is accurate. You will have to contact the Chartered Professional Accountant, the only instance that can revise and confirm this document. It is not a rare mistake that people think they can use software to create this report. Your financial statements won’t be recognized as Notice to Reader unless the official accountant checks them.
What is the Price?
It depends on various factors when it comes to the price. First of all, if you decided to make one after being active for years, it will be more expensive then the case where you were getting this report annually. Also, the size of the business can make a difference since the accountant will have more data to deal with. The best solution is to consult with the expert in this area to check whether it is a good idea to have a prepared report even if you don’t need one. That might save you some money in the future.
How To Prepare it?
In most cases, this document is made at the end of the fiscal year. When it comes to additional documents, you will need all details related to the transactions made in the following year. Also, you will have to check the business account to be sure that there are not missing files. Besides that, be sure to include taxes, additional expenses, and fixed assets.
Furthermore, you will have to learn more about the form. The main elements are the nature of the assignment, scope limitation, and caution to the reader. When it comes to the nature of the assignment part, the accountant must provide more details about the reasons why he is preparing this report, along with financial details that are relevant in that case. The scope limitation is informing the reader that this report is not a final form that is required for checking the accurate financial details. The notice to reader is there to inform that this file is not made for user’s purpose.
How it Differ from Review Engagement?
First of all, we have to mention that the Notice to Reader does not provide any form of guarantee that financial details are accurate or reliable. That is the main reason why many institutions and investors often request a review engagement.
This document will provide more details about the accuracy of financial statements. Keep in mind that most banks will ask for this report instead of Notice to Reader simply because it is more reliable. If you need a review engagement, it must be provided by a licensed official accountant.
Applying for loans or seeking more funds from investors are not the only reasons for having a Notice to Reader ready at the end of each year. As we already mentioned, it can be a great solution for making more accurate tax payments.
Also, you can never know whether you might need one at certain point. Even though modern software can help in many reports, getting this one can be more challenging. Therefore, the most common misconception is that you should never deal with this report unless you really need one.
In the end, we have to mention that the accountant working in your company can prepare this document. However, only a licensed CPA can verify it. The average price is around $2,500, but the price can be different related to the size of the company, and details in the report.
As you can see, there are many cases where you will need this report. If you are not sure whether you should get one or not, the best solution is to consult with an expert in this area.