Farm Financial Audits and Reviews

• audit
• financial statements
• lenders

What is the difference between an audit, a review and a compilation?

These are three levels of outside involvement with your financial statements. In a compilation, an accountant helps present your numbers in proper form but gives no assurance that they are accurate. In a review, the accountant asks questions and does analytical checks and gives limited assurance. In an audit, the accountant tests records and evidence in depth and gives an opinion on whether the statements are fairly presented.

The deeper the level, the more time, documentation and cost involved. Your CPA can explain exactly what each includes under current professional standards. If a lender uses one of these words, ask them to put the exact requirement in writing so your CPA can quote the work accurately.

Who asks for them?

Lenders may require compiled, reviewed or audited statements, depending on the size of the loan and their policies. Investors, landlords, partners and some government programs may also ask. Most small and mid-sized farms provide internally prepared statements and tax returns instead.

If a lender asks for outside statements, ask exactly what level they mean, since the word audit is sometimes used loosely.

Some lenders also use their own review of your records, such as site visits and inventory checks, even when they do not require a CPA's report. Ask what to expect. Smaller loans from many lenders rarely need them, while larger or more complex financing is where the request is most common.

What is an internal review or farm financial check-up?

Many farms benefit from a lighter step: an annual review of your own numbers with your accountant or an extension farm business specialist. You check that the balance sheet ties to loan statements, inventories are counted and values are reasonable.

This is not a formal audit, but it builds habits and catches mistakes before a lender or tax authority does.

A short written summary of what you checked and what you changed is helpful. Keep it with your records and share it with your lender when asked.

• Loan balances match lender statements
• Inventory counts and values are current
• Bank accounts are reconciled
• Asset values are supported
• Income and expenses are in the right year

How do you prepare for outside work?

Clean books come first. Reconcile every bank account, tie loans to statements, count inventory and list assets with support. Gather leases, contracts and insurance documents.

Assign one person to answer the accountant's questions quickly. Delays are a main driver of cost.

Pull records together in one place before the accountant arrives. Bank statements, loan statements, inventory sheets, contracts and insurance policies are the usual starting list. Starting early, several months before the lender's deadline, lowers stress and gives time to fix problems you find.

What does an outside accountant look for?

An accountant looks at how consistently you record transactions, whether values are reasonable, whether loans and obligations are complete, and whether related-party dealings are disclosed. In an audit, they also confirm balances with banks and lenders.

They are not hunting for wrongdoing. They are trying to determine whether the statements fairly reflect the farm's position.

Questions from the accountant are normal and are not an accusation. Answer plainly and ask for clarification when you do not understand the question.

What does it cost and is it worth it?

Costs vary widely with the level of work, the size of the operation and the state of the records. Ask for a written estimate and what could change it.

If a lender or partner requires outside statements, the cost is a condition of doing business. If not, a careful internal process with a CPA's review may serve you well for less.

Cost also includes your own time. Estimate how many hours you will spend answering questions and finding documents, and plan around your busy seasons.

What mistakes should you avoid?

Do not agree to a level of assurance without understanding it. Do not hide problems from the accountant, since surprises cost more than disclosure. Do not mix personal and farm accounts, which makes any outside work harder.

This article is general education only. Rely on your CPA and your lender for requirements that apply to your situation.

If you are unsure whether a lender's request is reasonable, ask a CPA or your extension farm business specialist before agreeing to anything. Whatever level you choose, keep a copy of the final statements and the accountant's letter with your permanent records.

Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.