Reviewed Financial Statements for Construction: When Your Surety Wants One
Somewhere past the $1 to $2 million mark in bonding, most subcontractors hear a sentence they haven't heard before. The surety wants CPA-reviewed financial statements this year, not the internally prepared ones that worked until now.
A review typically costs a smaller contractor somewhere in the $5,000 to $15,000 range, it happens on a deadline, and how painful it gets is mostly decided before the reviewing CPA ever opens the file.
We run the books for construction subcontractors, and we deliberately don't perform reviews or audits ourselves, which is exactly why we can walk through this honestly. We're the side that prepares the books the reviewer reviews, and we've watched the difference between contractors who walk into a review prepared and contractors who fund a cleanup project at review prices.
This post covers what triggers the requirement, what compilation, review, and audit actually mean, how to choose the CPA who performs the work, and what decides whether your review is cheap or expensive.
Why sureties care about your financial statements
A surety bond is essentially credit. The surety is guaranteeing your performance to the project owner, and like any lender, it underwrites you before extending the guarantee. For small bonding programs, internally prepared financials or a CPA compilation are often enough. As your single-job and aggregate program limits grow, the surety's exposure grows with them, and at some point the underwriter wants independent assurance that the numbers they're underwriting are real.
The thresholds vary by surety and by how strong the rest of your file is, but the common pattern runs in tiers. Internally prepared or compiled statements carry small programs. Reviewed statements become the ask as programs grow into the low millions. Audited statements enter the conversation for the largest programs, often in the $5 million plus range for single jobs. Banks follow a similar logic on lines of credit. None of these lines are fixed, and a contractor with strong history and clean books sometimes bonds further on less assurance than a shakier file gets on more.
Compilation, review, and audit in plain terms
The three levels of CPA-prepared financial statements differ in how much verification the CPA performs, and the cost tracks the effort.
A compilation means the CPA assembles your numbers into proper financial statement format without verifying them. No assurance is expressed. It's the cheapest level, commonly a few thousand dollars, and its value is presentation and the CPA's involvement, not independent checking.
A review sits in the middle and is the level sureties most commonly require from growing subs. The CPA performs analytical procedures and inquiries, looks hard at the things that make construction statements distinctive, the WIP schedule, revenue recognition on contracts, retainage, and over and underbillings, and expresses limited assurance that nothing material appears to need fixing. For a small to mid-size contractor, reviews typically run $5,000 to $15,000, with complexity and the state of your books driving where you land in that range.
An audit is the full verification exercise, with testing, confirmations, and the highest assurance level. Costs commonly start around $15,000 and climb well past $40,000 for larger operations. You generally don't buy an audit until a surety, lender, or contract requires one.
One thing all three levels share matters more than their differences. The CPA works from the books you hand them. Assurance work verifies and presents your numbers, it doesn't fix a year of messy ones, and when the reviewer finds a mess, the meter runs while it gets sorted out.
How to choose the CPA
Construction is a specialty within assurance work, and a reviewer who doesn't know the industry costs you twice, once in fees while they learn and once in credibility if the surety's underwriter spots weak construction reporting. A few filters separate the right firm from a generalist.
Ask how many construction clients they review. A construction-fluent reviewer asks about your WIP schedule, percentage of completion, and retainage in the first conversation, because those are where construction statements live or die. A reviewer who starts and ends with your trial balance is telling you construction isn't their world.
The WIP schedule in particular is the document your surety reads first, and what it shows is covered in What a WIP Schedule Is and Why Your Surety Wants One.
Ask whether they'll talk to your surety agent. The good ones do. The statement exists to support your bonding, and a CPA who understands what the underwriter wants to see produces a statement that works as a bonding document, not just a compliance artifact.
Ask what they need from your books and when. A firm that hands you a clear request list months before year end is a firm that runs an organized engagement. Fire-drill firms produce fire-drill reviews.
Independence matters too, and it's why your bookkeeper and your reviewer generally shouldn't be the same firm. The CPA expressing assurance on statements shouldn't be the one who built the underlying books. That separation isn't a workaround, it's how the system is designed, and it's the reason we stay on the preparation side and refer assurance work out.
For subs on the Treasure Coast and across Florida, firms like [PARTNER FIRM NAME] focus on reviews and attest work for contractors, which is exactly the profile to look for.
What actually decides the cost of your review
Here's the part the assurance firm won't say as bluntly as we will. Two contractors with identical revenue can pay wildly different review fees, and the difference is the state of their books on January 1.
A sub whose books already carry job-level costs, a maintained WIP schedule, retainage receivable tracked by contract, and clean monthly closes hands the reviewer a file that reviews smoothly, and the fee lands at the bottom of the range.
A sub whose books are one blended pile hands the reviewer a reconstruction project, and reconstruction at CPA review rates is the most expensive bookkeeping you'll ever buy.
The chart of accounts structure that supports all of this is covered in Construction Chart of Accounts Setup in QuickBooks, and it's the single best pre-review investment a sub can make.
The timing lesson is the same one. The year your bonding approaches the review threshold is the year to get the books structured, not the January the surety asks. Growing subs can usually see the requirement coming twelve months out, and twelve months is plenty of time to make the first review cheap.
At Prophet Accounting, we run the back office for construction subcontractors, with books structured around jobs, retainage tracked by contract, WIP-ready cost data, and monthly closes that make review season a handoff instead of a reconstruction.
We don't perform reviews or audits, and that's deliberate, because the books and the assurance work belong in separate hands. If your surety is starting to ask for more than your books can produce, schedule a consultation at prophetaccounting.com/construction or give us a call at (772) 380-2871.
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It varies by surety and file strength, but the common pattern is that internally prepared or compiled statements carry small bonding programs, reviewed statements become the requirement as programs grow into the low millions, and audited statements enter the picture for the largest programs. Your surety agent can tell you where your program's thresholds sit.
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Typically $5,000 to $15,000 for a small to mid-size contractor, though the state of your books drives where you land in the range. Books with job costing, a maintained WIP schedule, and tracked retainage review cheaply. Books that need reconstruction get expensive fast, because cleanup happens at CPA review rates.
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A compilation formats your numbers into proper statements with no verification and no assurance. A review adds analytical procedures and inquiries and expresses limited assurance. An audit is full verification with testing and confirmations and the highest assurance. Cost rises with each level, and sureties match the required level to the size of their exposure.
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Generally no, and you shouldn't want them to. Independence rules and good practice separate the firm that prepares your books from the CPA expressing assurance on them. The right structure is a bookkeeping firm that keeps the books review-ready year-round and a separate construction-fluent CPA firm that performs the review.
