Financial Statement Audits for Private Companies
Most business owners don’t go looking for an auditor. The business needs a loan to buy equipment or expand operations. Investors want assurance that the financial statements are correct. A surety raises the bonding limit and attaches a condition. Whatever the trigger, the deadline is usually shorter than it should be, and if you’ve never been through an audit before, it’s hard to know what you’re actually buying.
Two Hills CPAs performs financial statement audits for privately held companies across Denver, Colorado, and the Mountain West. This page explains why you’re business might need an audit, whether an audit is genuinely what you need, and what the engagement looks like from your side of the table.
Why Audited Financial Statements are Needed
Private companies almost never audit voluntarily. There’s a requirement behind it, and knowing which one you’re facing determines what you actually need.
Your lender is requiring it
The most common trigger by far. Credit agreements frequently include a covenant requiring annual audited statements once borrowings pass a threshold. The covenant language matters — some lenders will accept a review, and a surprising number of borrowers pay for an audit they were never contractually required to get. Send us the agreement and we’ll read the clause before you commit to anything.
An investor or buyer is running diligence
If you’re raising capital or selling, the other side wants financial statements that someone independent has tested. Buyers discount valuations for uncertainty, and unaudited numbers are uncertainty. Companies that expect a transaction in the next two to three years are usually better off starting the audit cycle early rather than trying to produce audited history under deal pressure.
The business has outgrown a review
Companies often start with a compilation, move to a review, and eventually get pushed to a full audit. If a stakeholder has told you limited assurance is no longer enough, that’s the step-up.
Your bonding company is asking for it
Contractors hit this as bonding capacity grows. Sureties evaluate working capital and equity, and above certain program sizes they stop accepting anything less than an audit. Construction accounting carries its own complications — percentage-of-completion, over- and under-billings, job cost accuracy — and these are where bonding-driven audits usually get difficult.
It’s the business’ first audit, what to expect
First-year audits are their own thing. Opening balances have to be established, prior-period figures verified, and internal controls documented from scratch. It takes longer and costs more than an ongoing engagement, and any firm telling you otherwise is setting up a surprise later.
Audit, Review, or Compilation – Which do you actually need?
These three engagements are frequently confused, and the price difference between them is substantial. Getting this right before you sign is worth the conversation.
| Audit | Review | Compilation | |
| Level of Assurance | Reasonable assurance — the highest a CPA can provide | Limited assurance | None |
| What we do | Test balances, confirm with third parties, evaluate internal controls, verify inventory | Analytical procedures and inquiries of management | Present your data in financial statement format |
| Standards | GAAS | SSARS | SSARS |
| Independence Required | Yes | Yes | No — but any lack of independence must be disclosed |
| Typically Required By | Lenders, investors, sureties, regulators | Smaller lenders, some suppliers | Internal use, some bankers and landlords |
The short version: an audit is the only engagement where we independently verify what your financial statements say. A review gives a stakeholder limited comfort that nothing looks materially wrong. A compilation provides no assurance at all — it’s a presentation service.
If you’re not certain which one your situation calls for, that’s a fifteen-minute conversation, not a proposal.
What the Engagement Actually Involves
Planning and Risk Assessment
We start by understanding your business, your industry, and where the risk of material misstatement actually sits. This drives everything that follows. A well-planned audit tests the accounts that matter and leaves the rest alone — which is the difference between an efficient engagement and one that consumes your controller’s entire spring.
Fieldwork
Testing of balances and transactions, third-party confirmations with banks and customers, inventory observation where applicable, and evaluation of the accounting estimates management has made. We’ll give you a request list up front so your team can gather documentation on its own schedule instead of scrambling.
Reporting
You receive financial statements with our independent auditor’s report, plus any required communications to those charged with governance. If we identify control deficiencies along the way, you hear about them in a management letter — not as a surprise at the end.
Timing and Cost
We work backward from your deadline. If your covenant requires audited statements within 120 days of year-end, that date sets the schedule, and we’ll tell you honestly at the outset whether it’s achievable.
Cost depends on the things that drive audit hours: revenue and transaction volume, number of locations or entities, inventory complexity, the quality of your closing process, and whether this is a first-year engagement. Books that close cleanly and on time cost meaningfully less to audit than books that don’t. We quote a fixed fee after a scoping conversation — no hourly surprises.
Working with Two Hills CPAs
Two Hills has decades of audit experience serving Colorado businesses. We received a Pass, the highest rating issued under the AICPA Peer Review Program, on our most recent peer review that was completed in June of 2026. We are current on the most recent AICPA SQMS standards and stay up to date on industry standards.
Brian Hill, CPA, MBA, CFE, is the firm principal and is personally engaged in every audit. He leads a team of two to four professionals through planning, fieldwork, and completion. The person who scopes your audit is the person who runs it – for companies that have been through an engagement where the partner disappears after the kickoff meeting, that difference is the whole point.
Our audit work concentrates on asset-heavy businesses – including rail terminals and transloading facilities – and wholesale distributors. We also have extensive experience in the oil and gas industry and bring that industry knowledge to audit engagements in the sector. Brian’s Certified Fraud Examiner credential adds depth to internal control evaluation and fraud risk assessment. While our audits are thorough, we work with clients to help them understand any adjustments and improve their capabilities and systems.
If you are looking for engagements that are specifically targeted to evaluating internal controls and fraud risk, you can find more information here.
Common Questions
How long does a financial statement audit take? For an established private company with a clean close, plan on four to eight weeks from the start of fieldwork to issued statements. First-year audits run longer.
Can you audit our first year if we’ve never been audited? Yes. First-year engagements require additional work to establish opening balances and verify prior-period figures, which we’ll scope and price transparently before you commit.
Will an audit find problems? Sometimes, and that’s the point of an independent look. Control deficiencies are common in growing private companies and are usually straightforward to fix. Finding them through an audit is considerably better than finding them another way.
Do you also perform reviews and compilations? Yes. If your requirement doesn’t call for a full audit, we’ll tell you so.
Contact our office to discuss your audit needs.
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