01
The challenge
The lender needed reviewed statements quickly, but the books carried significant equipment and leasehold improvements with zero accumulated depreciation, several accounts with negative balances, unclear member equity and payables that did not reconcile. Issuing a review on those numbers would have misstated both earnings and net worth.
02
Our approach
- Management inquiry first. A structured management inquiry questionnaire (MIQ) was completed and signed by the client's accounting lead.
- Depreciation corrected. Equipment and leasehold improvements were depreciated under ASC 360, with improvements written off over the shorter of useful life or lease term.
- Balance sheet cleanup. Negative balances were reclassified, payables reconciled to vendor statements and member equity rolled forward.
- Analytical procedures. Margins, labor and occupancy costs were compared across periods and against franchise benchmarks.
- Lender-ready package. Review report, statements, notes and a CPA letter addressed to the bank.
03
Results delivered
- An SSARS review report with financial statements and notes accepted for the refinance file.
- Depreciation and equity corrected, giving the lender a supportable net worth.
- An MIQ summary and adjustment list the client's bookkeeper now uses at each year end.
04
Frequently asked questions
Many lenders accept an SSARS review for small and mid-sized loans. Check your loan agreement or ask your lender which level it requires.
A structured set of questions the reviewing CPA asks management about accounting policies, estimates, related parties and subsequent events. The answers support the review.
Without depreciation, assets and profit are overstated, so the lender sees a stronger business than the books support.
Related services
Key terms See the glossary →
