Private companies or businesses in the US and Canada are required to keep financial records for tax purposes, and these records may be used to prepare financial statements. The records are typically kept by the company's accounting or finance department, and may include records of sales, expenses, assets, liabilities, and other financial transactions.
In the US, companies must keep financial records and supporting documentation for a minimum of three years, and in some cases, up to seven years. These records may be stored electronically or in paper format, and they must be available for review by the Internal Revenue Service (IRS) upon request.
In Canada, the Canada Revenue Agency (CRA) requires businesses to keep financial records for a minimum of six years from the end of the tax year to which the records relate. The records must be kept in Canada, and they must be available for review by the CRA upon request.
Private companies may use these financial records to prepare their tax returns and financial statements, which may include an income statement, balance sheet, and cash flow statement. These statements provide a snapshot of the company's financial performance and position, and they may be used to make business decisions, secure financing, or comply with regulatory requirements.
Private companies may choose to have their financial statements audited
In both the US and Canada, private companies may choose to have their financial statements audited, reviewed, or compiled by a certified public accountant (CPA) or a chartered professional accountant (CPA). However, private companies are not legally required to have their financial statements certified by a CPA or a CPA firm.
Public companies in both countries are required by law to have their financial statements audited by a CPA firm, but private companies are not subject to the same requirements. Nonetheless, many private companies choose to have their financial statements certified by a CPA or a CPA firm as a way to provide assurance to stakeholders and investors.
If a private company decides to have its financial statements certified, it will typically engage a CPA or a CPA firm to perform an audit, review, or compilation of the financial statements. The CPA or CPA firm will then issue a report that provides an opinion on the accuracy and completeness of the financial statements. The report may also include recommendations for improving the company's financial reporting and internal controls.
If a private company's financial statement is certified by a CPA and the statement contains material misstatements or errors, the company may still be liable for any income tax owed to the government. The CPA who certified the financial statement may also be liable for any damages resulting from the misstatements or errors, depending on the specific circumstances and applicable laws and regulations.
Generally, CPAs are held to a high standard of care and are expected to exercise professional judgment and due diligence when preparing or certifying financial statements. If a CPA fails to meet these standards and the company suffers financial losses as a result, the CPA may be held liable for any damages or losses incurred by the company.
However, the specific liability of the company and the CPA would depend on various factors such as the nature and extent of the misstatements or errors, the degree of negligence or misconduct involved, and any contractual agreements or limitations of liability between the company and the CPA. It is recommended that companies consult with legal and accounting professionals to understand their rights and responsibilities regarding financial statements and income tax liabilities. |
