A Generally Accepted Accounting Principles (GAAP) audit offers numerous benefits beyond just compliance for those in media and advertising — it enhances the credibility of a company’s financial statements, supports strategic decision-making, mitigates risks and meets stakeholder (or lender) expectations/requirements. A GAAP audit can also enhance stakeholder confidence in a company’s financial practices — a vital consideration for the media and advertising industry.

When it comes to ensuring the accuracy and reliability of a company's financial statements, a professional audit performed by a firm with specific industry expertise is indispensable. 

When evaluating whether to pursue an audit, media and advertising companies should consider several the following.

1. WHY WOULD I PROACTIVELY SEEK OUT AN AUDIT OF MY COMPANY’S FINANCIALS?

Many stakeholders, including investors (current and prospective), and business partners, expect audited financial statements. This is particularly crucial in media and advertising, an industry that has seen frequent high-value transactions and partnerships. A GAAP audit meets these expectations and can be a requirement for securing future financing, attracting future investors or forming strategic partnerships. It demonstrates your commitment to financial transparency and accountability, and adherence to appropriate industry and accounting standards.

Furthermore, if a company is considering a future merger, acquisition or sale in the in the near or distant future, audited financial statements are often a prerequisite. In media and advertising, where revenue recognition (including “gross” vs. “net” presentation), capitalization of intellectual property and software, and various complex liability and equity instruments play a critical role, robust financial audits are indispensable. A GAAP audit ensures that financials are in order and equips potential buyers or partners with the confidence they need to proceed with a transaction.

2. CONSIDER THE VALUE OF INDUSTRY EXPERTISE

Each industry is unique and has its own set of regulations and standards — work with an auditor who is well-versed in these specific requirements and can tailor their audit approach to suit the specific needs of the business.

GHJ's Audit and Assurance Practice has extensive experience working with agencies, software as a service (SaaS), licensing, platform-enabled services, and video games. The team aligns its audit services to address the nuances of this sector and provides a deep understanding of the complexities in revenue recognition, cost allocation, accounting for the capitalization of software and intangible assets and preparing for future financing or liquidity events. This results in a more efficient and effective audit process, saving company time and resources.

3. AN AUDIT IS MUCH MORE THAN “TICKING AND TYING” OUT NUMBERS:

An audit performed in accordance with Generally Accepted Auditing Standards (GAAS) is systematic and thorough, and involves the following:

  • Initial Planning: Understanding the business, industry and specific audit needs.
  • Risk Assessment: Identifying potential risk areas within the business’ financial statements and design.
  • Fieldwork: Conducting detailed tests (specifically tailored to address the risks identified above) and gathering evidence to support the financial data.
  • Review and Analysis: Evaluating findings, discussing them with management and ensuring compliance with relevant standards.
  • Reporting: Delivering (and often assisting with the drafting of) a comprehensive audit report that outlines not only the company's balance sheet and operations for the period under audit, but also significant accounting policies, required specific disclosures and reporting on any findings and recommendations.

4. IT TAKES TIME

No two audits are the same and timing depends on a variety of factors, including the complexity of the company, availability of resources and quality of available supporting documentation. For media and advertising companies, where schedules can be highly variable and contingent on project and campaign timelines, this flexibility is crucial. The process of conducting a financial statement audit can take 1-2 months and includes initial planning, detailed testing procedures, partner and quality control review and company approval of the final audited financial statement package.

5. NOT ALL CPA FIRMS ARE THE SAME

Not all CPA firms are the same and choosing the right firm should go well beyond the fee quote. The right firm for a company will depend on various factors including size, industry specialization, reputation, quality of service, technological capabilities and fit with the company’s culture. It is essential to choose a firm that understands the nuances of the industry, including royalty agreements and digital revenue streams. At the end of the day, the right firm should feel like a long-term business partner whose services extend far beyond an annual audit.

 

To learn more about how GHJ helps forward-thinking, entrepreneurial organizations with compliance, reporting and strategic planning, please reach out to GHJ’s Audit and Assurance Practice. To learn more about how media and advertising businesses can set themselves up for success, please reach out to GHJ’s Media and Advertising Practice.