We have tax returns and internal QuickBooks records, but we have never had a reviewed or audited financial statement. Why should we pay an outside CPA firm for a multi-year audit now if we are three years from a sale?

Question

Tyler Smith · Accepted Answer

Buyers discount what they cannot verify. Relying solely on internal QuickBooks files and tax returns is a major risk when you enter due diligence. Tax returns are optimized to minimize your tax liability, while buyers want to see maximized, verifiable earnings. Spending the money on a CPA reviewed or audited financial statement today is an investment that pays off in deal speed and valuation.

When you are three years out from a sale, you need to establish a baseline of institutional grade financials. A Quality of Earnings audit will eventually happen, but initiating CPA reviewed statements now ensures your accounting policies are GAAP compliant. It forces your team to clean up revenue recognition, inventory valuations, and accrued liabilities before a buyer discovers discrepancies.

To implement this, start by upgrading your internal accounting team or hiring a fractional CFO who understands transaction prep. Direct them to work with a reputable third-party CPA firm to perform a review of your current fiscal year. Move to a full audit for the final two years leading up to your exit.

This transition does more than satisfy a future buyer. It gives your leadership team accurate numbers to run the weekly Scorecard and make better operational decisions. It also signals to private equity and strategic buyers that your business is run like a professional enterprise, not a lifestyle sandbox. This professionalization alone can bump your valuation multiple.