To Audit or Not to Audit

Members with annual revenue of $3 million or more for the most recent accounting period are required to submit accurate and complete financial statements prepared in conformity with U.S. GAAP and audited by an independent certified public accounting firm in conformity with U.S. GAAS.  Members with annual revenue of less than $3.0 million for the most recent accounting period may voluntarily submit an annual GAAP/GAAS audit.

Members with annual revenue of more than $2 million and less than $3 million for the most recent accounting period, not electing to voluntarily submit an annual GAAP/GAAS audit, are required to submit complete and accurate financial statements (with disclosures) prepared either in conformity with U.S. GAAP or the modified cash basis of accounting, reviewed by an independent certified public accounting firm and apply certain financial controls. For purposes of this paragraph, the term “modified cash basis of accounting” means a comprehensive basis of accounting that includes recognition of property and equipment as assets, depreciation as expense, and debt, other than trade payables and ordinary accruals, as liabilities.(1)

Members with annual revenue of less than $2 million for the most recent account period, not electing to voluntarily submit an annual GAAP/GAAS audit or review, are required to submit complete and accurate financial statements (with disclosures) prepared either in conformity with U.S. GAAP or the modified cash basis of accounting compiled by an independent certified public accounting firm and apply certain financial controls.(1)(2)

(1) Notwithstanding these provisions, ECFA may require any member to submit audited GAAP/GAAS financial statements as a condition of membership.

(2) Obtaining an audit may be required to comply with state law.


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