An audit is an opportunity to assess the quality and reliability of the information you use to make important decisions. We provide valuable insight to help your cannabis business grow:
There are many important differences between an audit, a review, and a compilation of cannabis financial statements.
First, a compilation requires the auditor to just show the financial statements based on the presentations made by the management team, but with no effort to confirm this insight.
Next, during a review arrangement, the auditor administers analytical steps and asks questions about whether the truthfulness of the information shown in the financial statements. The outcome is a restricted level of assurance. The cannabis financial statements being presented are not required to have any material changes.
Finally, during an audit engagement, the auditor must authenticate the final balances in the client’s accounts and admissions. This calls for the analysis of source documentation, third party verifications, physical observations, tests of internal controls, and other procedures as needed by the auditor.
Financial statements are how cannabis companies portray their story. Because of GAAP, there are four standard cannabis financial statements every operator must prepare. The four statements show the profitability and financial strength of a cannabis company.
The cannabis industry is still in the beginning stages. This means that there lacks a push for cannabis operators like cannabis farmers, extractors or manufacturers to get a third-party audit. In fact, many grow operations will supply their own product into their own retail shops. The question is, why should a cannabis farmer, extractor or manufacturer get a third-party audit from GreenGrowth CPAs? Third-party audits are vital to continuing product protection and assessment by giving a third pair of eyes to confirm what is working for the cannabis company and what is not. With federal de-scheduling around the corner, your cannabis company will need audited financials to go public.
With an emerging industry such as cannabis, you will surely come across some types of fraud, embezzlement, or financial misrepresentation. With detailed financial analysis and tracking the movement of assets, forensic investigations can detect the problems and identify the methods used to deceive cannabis business owners.
Investors & co-founders alike should be aware that just because you know someone personally or have interacted with a business many times, that doesn’t mean you aren’t or won’t be deceived at some point. Forensic accounting utilizes accounting, auditing, and investigative skills to conduct an examination into the finances of an individual or a business.
This type of accounting also provides an analysis or a report that’s suitable to be used in legal proceedings. When you get to a point where you actually need to investigate financial crimes or misrepresentation, that’s when forensic accounting comes into play. This forensic report will be used in some kind of legal proceedings in a court case.