Buyers need to be assured of the accuracy of the financial statements of the seller, otherwise the sale is at risk of falling apart during due diligence. Audited financials provide the highest level of assurance, but auditing must start at least a few years prior to any sale. This is due to the requirement for audits of opening year balance sheets to be presented in a set of comparative year financial statements. Many smaller companies, however, have never had a reason to produce audited financials (e.g. independent shareholders or financial institutions). How could they go about providing buyers with an acceptable level of assurance? Reviewed financial statements can do just that. Reviews do not require long-term advanced planning, are more flexible concerning years presented, and can be prepared more quickly. If a seller has not had audited statements in the past (in the normal course of business or in advanced preparations for a sale), reviewed financials are an attractive alternative.
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