Regulatory Compliance & Internal Controls
Control weaknesses are what turn a clean audit into a management letter. Fixing them beforehand is cheaper than being told about them afterward.
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Service 03: Assurance
Audit & assurance
Audits, reviews and compilations delivered under US GAAS to a timetable we publish before we start, plus readiness work in the ninety days beforehand, so your first audit is not also your hardest.
At a glance
- Standards: US GAAS; GAGAS where applicable
- First audit: 10 to 14 weeks typical
- Recurring audit: 6 to 8 weeks typical
- Fee: fixed, quoted after scoping
- Independence: we cannot audit books we prepared
Fit
Who this is for
- A lender or investor has asked for audited statements. Usually as a covenant condition, and usually with less notice than you would like.
- You are a nonprofit crossing a threshold. New York's charitable registration tiers and many funders trigger an audit or review obligation at defined revenue levels.
- Your benefit plan has reached 100 participants. An ERISA plan audit filed with Form 5500 is now an annual obligation.
- Last year's audit was painful. It ran long, produced a list of adjustments, and ended in a management letter nobody wants repeated.
- You are preparing to sell or raise. Audited history materially shortens diligence and materially improves your negotiating position.
Choosing
Audit, review or compilation?
The three differ by level of assurance, not by thoroughness of effort. Check what your lender, funder or board actually requires before buying the most expensive option: a surprising number of covenants ask for a review and get sold an audit.
| Audit | Review | Compilation | |
|---|---|---|---|
| Level of assurance | Reasonable: an opinion | Limited: a conclusion | None |
| Procedures | Substantive testing, third-party confirmations, control evaluation, physical observation | Analytical procedures and inquiry of management | Presentation of management's figures in statement format |
| Typical driver | Bank covenant, investor requirement, ERISA plan, funder mandate | Smaller lender requirement, board comfort, franchise agreement | Internal management use, small credit application |
| Relative cost | Highest, typically 3–5× a review | Moderate | Lowest |
| Client effort | Substantial: schedules, confirmations, walkthroughs, sampling support | Moderate: explanations for variances | Light |
Scope
What we perform
Seven engagement types. Each is scoped and quoted separately, with a written timetable stating who owes what to whom, and by when.
01
Financial statement audits
A full audit under US Generally Accepted Auditing Standards, covering risk assessment, control evaluation, substantive testing, third-party confirmation and analytical review, concluding in an opinion on whether the statements are fairly stated in all material respects.
02
Reviews
Limited assurance through analytical procedures and inquiry, appropriate where a lender or board wants independent involvement without the cost of a full audit. We will tell you honestly when a review is genuinely sufficient for your requirement.
03
Compilations
Financial statements presented in proper form from management's records, without assurance. Useful for internal management reporting and smaller credit applications, and available to clients whose books we prepare, where an audit would not be permitted.
04
Employee benefit plan audits
ERISA plan audits filed with Form 5500 for plans reaching 100 or more eligible participants, governed by Department of Labor requirements rather than ordinary commercial standards, and scoped and staffed with that distinction in mind.
05
Agreed-upon procedures
Specific procedures defined by you or a third party and performed exactly as agreed, with findings reported factually and no opinion expressed. Common for royalty audits, grant expenditure verification, earn-out calculations and closing-balance disputes.
06
Audit-readiness programs
Ninety days of structured preparation before fieldwork: reconciling every balance sheet account with documented support, building the schedules auditors will request, documenting estimates and the judgment behind them, and closing obvious control gaps before an auditor names them.
07
Single audits & grant compliance
Uniform Guidance single audits for organizations expending federal awards above the threshold, covering compliance requirements, internal control over compliance, and the schedule of expenditures of federal awards.
08
Management letter follow-through
Every audit produces observations. We convert them into a tracked remediation plan with owners and dates, then re-test the following year, rather than issuing the same letter twice and calling it diligence.
The independence rule, stated plainly
We cannot audit financial statements we prepared. If Hudson provides your bookkeeping or acts as your outsourced CFO, the audit opinion has to come from another firm, and we will say so during scoping, not after an engagement letter is signed. In that situation we will happily perform a compilation, run your readiness program, and introduce you to independent audit firms we rate.
Deliverables
What you receive
Plus one thing most firms leave out: a debrief on what made this audit expensive, and what to change before the next one.
- Audited financial statements with notes
- Independent auditor's report
- Governance communication letter
- Management letter with observations
- Schedule of audit adjustments
- Tracked remediation plan
- Board or audit committee presentation
- Post-audit debrief and next-year plan
Engagement
How an audit actually runs
Published dates in the engagement letter for every milestone, including the ones we owe you. An audit that runs long is almost always an audit that started badly.
Stage 01
Plan & assess risk
Understanding the business, identifying where material misstatement is most likely, evaluating the control environment, and agreeing materiality. Two to three weeks, and the stage that determines everything after it.
Stage 02
Request & prepare
A single consolidated request list issued up front rather than in drips. You prepare schedules; we answer questions on format before you build them, not after.
Stage 03
Fieldwork
Substantive testing, confirmations, walkthroughs and sampling. Open items are tracked on a shared log you can see, with a standing check-in so nothing surfaces at the end as a surprise.
Stage 04
Report & debrief
Partner review, adjustments agreed, statements drafted, opinion issued, and a board presentation if wanted, followed by a debrief on what to fix before next year.
Sectors
Where audits get specialized
Revenue recognition and restricted funds are where audits become genuinely sector-specific. These are the environments we work in most.
Questions
Audit & assurance FAQ
They differ in the level of assurance provided. An audit is the highest: the CPA tests balances and transactions against third-party evidence, evaluates internal controls, and issues an opinion. A review gives limited assurance from analytical procedures and inquiry, with no substantive testing and no opinion. A compilation gives no assurance: management's figures presented in statement format.
An audit typically costs three to five times a review. Check what your lender or funder actually requires before assuming you need the most expensive one.
For a first audit of a small or mid-sized business, expect ten to fourteen weeks end to end: two to three weeks of planning and risk assessment, two to three weeks of fieldwork, and four to six weeks of review, adjustment and reporting. A recurring audit of a well-prepared client usually compresses to six to eight.
The variable that moves this most is the quality of your reconciliations and supporting schedules, not the size of your balance sheet. A well-prepared $40M business is a faster audit than a disorganised $8M one.
No. Professional independence rules prohibit it, and we will not construct a workaround.
If we provide your bookkeeping or outsourced CFO service, the audit opinion must come from another firm. We can still perform a compilation, run your audit-readiness program, and introduce you to independent audit firms we rate. We raise this at scoping rather than after an engagement letter is signed.
Structured preparation in the ninety days before fieldwork, for organizations facing their first audit or recovering from a difficult one. It covers reconciling every balance sheet account with documented support, building the schedules the auditors will request, documenting significant estimates and the judgment behind them, drafting internal control narratives, and closing obvious control gaps.
The work that determines how your audit goes happens before fieldwork starts, not during it. Our 90-day readiness plan sets out the full week-by-week sequence.
Yes. Plans reaching 100 or more eligible participants generally require an annual audit filed with Form 5500.
These are governed by ERISA and Department of Labor requirements rather than ordinary commercial audit standards, and DOL inspection findings are common where firms treat them as routine overflow work. We scope and staff them as the specialization they are.
Related services
Often engaged together
Accounting & Bookkeeping
Audit cost is driven by preparation quality. A reconciled ledger with documented support is the single largest lever on the fee.
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Risk Advisory & Forensic Accounting
An audit is not designed to detect fraud. Where something specific is suspected, a forensic engagement is the correct instrument.
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Next step
Find out what you actually need
Send us the covenant or funder requirement and your latest statements. We will tell you whether it calls for an audit, a review or a compilation, and what it would realistically cost and take.