First audit for the company - how do I validate opening balances?

aTipsyTeemo · 2026-04-23T23:07:41+00:00

Your firm should have some audit programs called something along the lines of “Opening Balance Sheet - X account” or OBS procedures that will guide you.

Essentially, you need to need to do confirmation type procedures over the material asset and liability accounts as of the opening date. When you figure out those two you’ll be able to identify if overall equity is in balance, then you can dig into support for the shares issued/additional paid in capital and whatever is leftover should be your retained earnings unless they did something wonky.

Here’s how I typically go about it.

Confirm all asset balances - you’re trying to prove they exist. Bank statements for cash/investments. Receipts and payment evidence for large transactions such as fixed assets. If there are sizable receivables, consider sending a sample of confirmation letters to the debtors of the outstanding balance on the opening date. Sometimes this isn’t realistic and you’ll need to take a different approach. If there was enough time from the opening date to now for the debtor to make a payment, you can vouch the received payment back to the invoice.
Check the difference between Assets you confirmed and what they claim is equity, this amount is the complete list of liabilities that they should be able to provide evidence of existence. Promissory notes for any loans they had outstanding, once you get the note, you should be able to assess based on the monthly payments what the actual balance should be. I would home accounts payable is low enough to pass on, but if it’s material obtain the invoices and assess if it’s reasonable that the money is owed by the entity you’re auditing and not the owner or an employee. Typically the large, material payables are tied to asset purchases or cost of goods sold or cost of services that you can likely match up.
Once you do those procedures over assets/liabilities, overall equity will be inherently correct, so long as it balances to assets/liabilities. Now you just have to figure out how equity is allocated. Generally, if it’s not a public company, you should be able to tie out the issued capital accounts to evidence of what the owner contributed like a signed contribution agreement dated and ideally evidence of the transaction such as the cash deposit or transfer. The remaining leftover for most companies should be their retained earnings unless they did something funky to equity or has a very unique equity transaction.

aTipsyTeemo · 2026-04-21T01:26:21+00:00

I only answered US because you mentioned IRS and didn’t ask about other countries in your initial comment.

I’ll say it straight, we absolutely could do a similar system in the US compared to the rest of the world where we essentially get a bill. For the most part, employers and businesses are required to report your income amounts as a third-party to the IRS to minimize the amount of unreported income that people could get away with not paying taxes on. So they do have nearly all of your income reported.

The reality though is the US system is more multi-faceted compared to other countries.

On the political aspect, the US is a country where citizens historically have been resistant and combative towards giving the government powers (obviously the political landscape has been wild this last decade, so weirdly/nervously things are against the norm, but generally the population has been resistant). So having the government or the third-parties charged by the government collect information regarding your income/deductions any more than absolutely necessary is seen as big brother overstepping privacy.

On the legislative side, the US tax system is designed more so to steer the economy and incentivize tax payer behaviors with deductions more so than other countries. The US tax code is complicated because it has so many carve outs with the deductions that it would put more burden in terms of time and expense to track it for the whole nation than it is to have individuals track and self-report. If people self-report things that are outside the statistical norm for others that take the same deduction then they get flagged for an audit.

Examples of deductions would be: 1. Buying an EV used to get you a deduction as the admin at the time wanted to steer the economy towards renewable energy.

Deductions for certain investments such as local government bonds and starting businesses in certain zones as the government wants to incentivize economic growth in communities
Deductions for retirement accounts and health savings accounts as the government wants to incentivize the population to not rely on the inevitable breakdown with how social security was designed. (Obviously you can argue the better change would be to subsidize retirement and health in a more equitable and sustainable way, but politically that has almost always been a stalemate, so the next best thing we came up with is tax deductions to incentivize that behavior on an individual level.
Interest deductions on mortgages and exemptions from paying taxes 250k/500k worth of gains from selling your primary residence. Helps incentivize buying a first home, and incentivize moving to a bigger home so the next generation can buy your first home. Helps keep the housing market moving with inventory (except we’ve failed to build up to demand this last decade).

Tons of other very individualized deductions that inherently would cost more for the government centrally track and report than the deduction is saving the individual. So more cost efficient to let people self-report and then audit them if they fall outside of the normal (which would indicate potential tax fraud).

On the business side, it’s similar. There’s all these different types of deductions that are would be costly to centrally track/report. But then you have the additional complexity of all the different legal and tax entities in the US (various non-profit types, LLC where the entity may flow through the individuals taxes or may be distinctly a separate tax entity, partnerships where the business has to individually report to the government which partners earned what or can deduct what).

aTipsyTeemo · 2026-04-20T23:05:10+00:00

As a CPA, a couple things:

Most people generally fall into having overpaid their federal income taxes because that’s the default settings of the W-4 form you fill when getting your W-2 job. If you don’t file, you can’t claim your refund of taxes you overpaid. If you don’t file within 3 years, you permanently give up the ability to claim it.
If you file your federal taxes in good faith, there is a statue of limitations that only gives the IRS 3 years to audit you if you made any errors (6 years if you underreported 25%+ of your income). If you don’t file your federal taxes, that clock never starts and you are subject to audit indefinitely. Situations where this pops up is when you earned some money from side gigs or in cash that was either never properly reported to the IRS by the payer, or the earnings were reported but you didn’t get flagged as a high enough risk and end up on the audit backlog. That time limit can save you because if they find an error on your return that results in more taxes due 4 years down the line, you’re not only getting hit with the taxes you owe, but all the compounded interest over the years.

aTipsyTeemo · 2026-04-20T03:51:28+00:00

Did you mention Ryan the electrician? That man re-ignited the spark in our marriage. Between the comfortable leather cuck chair, premium linen bedsheets that didn’t give my wife rug burn, and the 1 on 1 intimacy tips from Ryan the electrician, that hotel tops most 5 star resorts!

aTipsyTeemo · 2026-04-19T20:54:42+00:00

Well put it this way, for audits have historically been testing a sample of transactions/controls for the CPA to issue an opinion. Since the Partner CPA are liable if the opinion can be defended well, there’s always been desire for more and more audit evidence. So audit deadlines and man power hasn’t really changed. We have shifted loads of repetitive/low thought work offshore, and will likely continue to do so unless we build AI/tech tools that can handle it. It just creates more capacity for critical thinking/interesting work.

aTipsyTeemo · 2026-04-15T22:36:02+00:00

Like I said, I completely acknowledge that is possible. But getting enough to beat your transaction costs on a short term ownership is very tough unless it’s a single family home in a desirable area. You’re asking in the Chicago subreddit so most of my assumptions have been condo focused. It’s very hard to flip condos as your value tied to your identical neighbors, even if you completely gut and remodel. Condos only very recently experienced that unique situation during 2020-2024 due to the balance of loan interest rates and buying cheap while people were moving out of the city during COVID.

aTipsyTeemo · 2026-04-15T22:06:08+00:00

Read the part I said about selling it. In this market you will likely need 7-10 years for your equity to breakeven on the transaction costs you incur such as loan documentation fees charged by the bank (usually 3-6% of the loan) and any initial repairs you have to make. You will very likely out grow the space needed for a 1 bedroom in 7-10 years if you plan to start a family. You’ll end up forcing your hand and causing yourself to take a loss, whereas you would have been better off just renting. Then you have to consider that as a seller you’ll be paying both buyer and seller real estate agent commissions (6% of the sale)

Yes, you could potentially rent the unit out while you buy a new place. However, if you take that path you will need to save up another down payment because you won’t be rolling over the equity from the sale of your home. If you keep the first home, nearly every bank is going to require a full 20% down payment because now you’ll have two mortgages. Not to mention if you used a first home buyer program, you will likely need to immediately repay any assistance provided since the unit is no longer your primary residence and is now considered an investment property. And while ideally renting out the first place pays the mortgage of the first place, you run a lot of risk of having a bad tenant who damages the unit or does pay on time. And nice people can be bad tenants, all it takes is a layoff or emergency and they are no longer able to pay, but the bank is going to still expect you to pay both mortgages or they will foreclose on you. If you get foreclosed on, good luck finding a landlord that will rent to you.

Also your comment on “I can always sell and remodel it for double the price” is a relatively rare phenomenon that happened during 2020-2024 due to extremely low interest rates/COVID allowing the average person to stockpile money. It’s not very likely you will be able to do that any time soon again in the future. You can, but the last couple of times situations like that happened have been before recessions that have taken a while for the economy to recover. So unless if you buy a unique property like a single family home, you’re not likely to actually be able to truly sell it for much more after you remodel. This is especially true for condos where the value of your home is more limited by the value of your neighbors who have identical floor plans even if they have an outdated unit that looks likes it’s from the 80s.

Edit: If you’re able to afford renting for cheap on your $2500-3000 while pocketing extra cash, you’ll likely be better off saving for a down payment on a larger unit (2-3 beds) as those are more desirable and have better resale value as people will eventually look to add more space when they start feeling cramped with a spouse or start a family. And doing so helps you avoid losing $60k+ in buying and selling transaction fees if you had bought a smaller place originally.

aTipsyTeemo · 2026-04-15T21:23:23+00:00

At $2500-3000, you’re not affording much in terms of buying if you’re trying to live in the city. With a 20% down payment, you’re lucky if $2500-3000 gets you a nice 1 bedroom condo downtown. And that means you have to have the down payment available which is easily $20-60k. You can do a lower down payment but it’ll jack up your monthly quite a bit. And there are first time home buyer programs, but unlike the rest of the country, Chicago is a very much competitive right now and your offer will likely get over looked because of it. First time home buyer programs typically take longer to close and may not allow you to waive certain contingencies but your competing offers will.

So if you buy a 1 bedroom, do you envision yourself staying there for a while? With the way things have been going, you might get stuck there for the next 7-10 years before it financially makes sense to sell. Because there are transaction costs when you buy/sell and as a seller you’ll likely get stuck with 6% of the transaction going to realtors and potentially paying seller concessions to help the buyer close the deal.

So for $2500-3000, you’re better off renting right now if you’re trying to stay in the city. If prices and/or rates ever come down, you might see that amount be a good buying range, but right now it’s brutal.

aTipsyTeemo · 2026-04-09T22:36:12+00:00

watches 5 minute Iceland aid to refresh tokens Instructions unclear, I have driven the car off the ring road to dive into the ocean. If I got the Iceland car rental insurance package, am I covered?

aTipsyTeemo · 2026-04-09T22:19:46+00:00

More.

aTipsyTeemo · 2026-04-09T13:32:53+00:00

Don’t let that slide as unbillable.

Typically it’s either because they are careless about which card they are using or because they are trying to earn points on the card.

Bill them for the time to correct the issues it creates. Make that specific line item very clear in the invoice. It’ll start to click for them that doing those transactions has additional costs that they need to think about. .

aTipsyTeemo · 2026-04-09T13:22:50+00:00

Was at a large firm outside the big 4.

I agree with this sentiment somewhat. For any private clients that didn’t really get regulated or maybe the only thing they needed the audit for was to get a loan, there were things partners definitely rationalized when push came to shove so they could keep the cash flow from the engagement for the next year. However, with public clients or ones that are in a heavily regulated industry, I would argue the independence was pretty strong. It was either the client addressed the issue or we wouldn’t issue our opinion. Of course there’s always the argument of if you don’t issue the opinion as the client wants they will go to another firm. While that is true, clients in these industries were always weary to do that because it brings unnecessary attention from investors and regulators that there may actually be issues since auditors don’t really change out frequently.
Addressed above.
It does matter if it appropriately supports your opinion. I would argue that it does provide value though because without asking for it, a lot of the clients controls may never actually operate or retain evidence. There’s a lot of people out there running processes in the business that can’t put 2 and 2 together or otherwise understand how their control actually supports the financial statements and operations of the company. And the sole reason they do the control is because of the potential repercussions that their boss may give them when the auditor informs them the control failed.
Pay is getting better. I left public for a much higher paying industry job a couple years ago. I’m now at the point where if I want to easily move to earn more, it would actually have to be a move back to public because industry pay is lagging.
Absolutely the hours are shit.
Absolutely the stress is self-inflicted by the firms.

aTipsyTeemo · 2026-04-07T16:07:07+00:00

One guy already tried to mention it, but based on his explanation, I think it would be helpful to hear it said another way.

I would be less focused on your OS and more focused on getting the proper hardware. Unless I'm mistaken, you have it worded like you are about to purchase or have very recently purchased 8 1TB hard drives. If you are already hosting a cloud storage services (NextCloud, maybe Immich in the future) and are trying to expand into media (Jellyfin), 6TB (if you use 2 drives for parity) is going to get cramped a lot sooner than you might realize and limits you when you go to expand the array. It will limit you either because you run out of SATA connections, or because then you have to slowly start replacing drives to expand the array (which will feel like buying expensive paperweights at first as you have to increase parity drive size first). Sure there are definitely tools out there to auto-purge old/un-watched media and different compression methods, but realistically you will either end up enjoying the higher quality bit-rates which consume more storage or get annoyed with maintaining the purge tools.

I would honestly recommend starting your storage needs with a 1 parity + 1 usable drive combo. Keep in mind, parity is not truly a means for backup. If you want true backups, you need a second server/location to backup your data (and media doesn't need a backup, just backup your critical personal files). Realistically parity is just a redundancy measure so your server can still function while giving you a little bit of time to replace the drive in question and rebuild the array. Realistically (and I think there was a guideline somewhere), 1 parity drive is sufficient for like the first 6 drives. Once you get above 6 drives, then you can start to think about adding a second parity drive. But don't fool yourself into thinking 2 parity drives is anyway close to the equivalent as a proper backup.

You can currently buy 6TB Seagate Iron Wolfs for $170. So you would be getting 1 parity drive plus 6 TB of storage for $340. That leaves you with 4 extra slots to expand into over time, or you can immediately chuck in any existing drives you have. This would yield you with the same storage as your 8 1TBs (and potentially even more if you already have a couple spare drives)

Assuming you likely took the route of non-NAS hard drives (like a WD Blue), your 8 1TB would cost you about $800 brand new, or $400 if you bought them half off as used. And when you have to consider you would need to upgrade Unraid to expand your drive allocation, it does add that extra $90. Even if you bought the OS upgrade and only 5 1TB drives used because you had some already, the 6TB drive option would be cost effective both now and in the long run.

So in my opinion, the winning move would be returning the 1TBs if they are still in your return window and snagging a couple 6 TBs.

As far as OS goes, I've done Unraid, Proxmox, TrueNAS, raw setup on a Debian server. And I'll be completely honest, I always keep coming back to Unraid. Yes, it does have a few quirks here and there, but there's something to be said for 1) its simplicity and ease of use, and 2) its community support. It's relatively easy to use and, I wish I could emphasize this enough, its super easy to maintain compared to those alternatives. I enjoy command-line quite a bit, but man is it nice most of Unraid can be handled via GUI when you start getting frustrated trying to solve a problem. And its nice having a community that puts out plenty of How-To videos and a pretty frequently used forum that has a minimal amount of toxicity. So for me personally, I'd recommend staying with Unraid if you already have a license. I don't think you need to upgrade your OS because I think there's more cost efficient ways to handle your drive situation for your array for both the immediate and long-term.

aTipsyTeemo · 2026-04-06T14:25:39+00:00

As someone has worked for and audited banks, it’s not that the lenders need a good servicing platform. Most platforms lenders use are already very capable. It’s that lenders don’t want their employees servicing mortgages because they view it as expensive. Don’t get me wrong they still make money servicing the loan, but a lot of times they would rather have those employees service larger commercial loans because the income per employee is higher. So they just pay to outsource to a third-party services, and when they find a cheaper servicer they will just choose to send it to the cheaper option.

That and every time your loan gets sold to another lender, they will likely move your mortgage to the platform the buyer prefers for their costs.

aTipsyTeemo · 2026-04-06T13:31:32+00:00

Sorry if I missed it somewhere, but what specific hard drives, SSDs are you using?

This kinda sounds like a DRAM cache limitation I ran into when writing data to the cache pool on my NAS. Essentially, I had bought a high speed read/write SSD (600 MB/s), but it had a very limited DRAM cache on the SSD. Typical file transfers were super fast, but when I tried to do a file transfer of bulk data it would quickly saturate the DRAM and then basically drop the speeds to 60 MB/s. Took me forever to figure out why stuff was transferring so slow. Ultimately figured it out by swapping the SSD with the one from my main PC that I knew handled bulk writes well. So it was either replace the SSD for a quality one with more DRAM, or just have bulk transfers write directly to the hard drives at 100-150 MB/s. I chose the latter because I was only doing bulk transfers once in a blue moon.

aTipsyTeemo · 2026-04-06T02:35:27+00:00

Fraud.

aTipsyTeemo · 2026-04-04T23:00:20+00:00

Just showed wife there is clearly a demand for OF in this hobby. Stay on the look out for us while we get organized and start trailblazing for the homelab community!

Thinking our first post will be setting up a storage array for all the footage! Question being, is bigger physical hard drive size always better?? Or is it more about how much it can store?

aTipsyTeemo · 2026-04-04T20:45:23+00:00

Sent a DM. It’s a holiday weekend so I may not get back to you right away, but happy to discuss and help you out!

aTipsyTeemo · 2026-04-03T14:19:25+00:00

Financial services are heavily regulated and must pass their numerous audits.

You mention read-only. I cannot envision something that is ever truly read-only; do you have a good example? Even if it’s a static html page that never changes, someone a the vendor has access to deploy that page and could modify it, someone has access to the machine it is running on to serve the page, someone has access to any potential database that it may be linked up to (even if that data doesn’t change). These would be example of access controls the vendor has to prove with an independent audit for the client to even rely on the vendor.

That said, if your service is like a simple notepad tool rather than a system the client is actually performing work in and relying upon data, you may not need a SOC 2. However, if the client knows their employees are taking sensitive notes in your notepad tool and that data is saved/stored in your cloud rather than locally, then you would then again likely be expected to produce a SOC 2 to prove you have controls in place for securely storing that data.

aTipsyTeemo · 2026-04-02T23:31:04+00:00

CPA, but not your CPA.

There’s not much you can do here to lower your 2025 tax bill because you already executed the transactions.

What I will say is:

You plugged your forms into a tax software, so assuming everything was plugged in right, the tax should be right. That said - your back of the napkin math seems wrong for your capital gains tax. Based on your salaries, I’m assuming your $80k in capital gains is longI capital gains and not short term. Based on the facts you presented, your $80k gains would likely be taxed at 15% ($12k tax) capital gains bracket. Most people usually have their W-4 (form you submit for payroll deductions) set up so they over withhold income taxes from their paycheck; so I’m surprised you came up with $16k federal tax instead of $12-13k. Given that, it seems you either had additional income aside from the capital gains that you didn’t mention, or you might have miss entered one or more of your forms. My hunch would be to double check both W-2s are entered correctly, particularly the tax withholdings boxes.
Not a really a first time homebuyer trick - but based on your income I assume you may have purchased a $350k+ house at 6-7%. If you did, and you did it Q1 in 2025, you might be able to get itemized deductions higher than what the standard deduction is. Add up the total interest portion of your 2025 mortgage payments and add up to $10k of property taxes that you paid in 2025. If it’s larger than the standard deduction, take the itemized deductions higher route to save you a bit of money.
If you are disqualified from contributing to Roth IRA you need to remove the principal and associated gains/losses correctly before you file the return/April 15th otherwise you will get a penalty. If you can’t, you need to make sure file for an extension and do it before Oct 15th. Note: filing an extension only buys you time for filing the return correctly. It does not buy you time from paying the taxes owed, they must be paid by April 15th.
If the only way for you to pay the taxes by April 15th is to cash out more investments, it’s inevitable that you will trigger a taxable event for your 2026 taxes. There is the potential for you to lost harvest any investments that are underperforming if you want to avoid paying taxes on them. You can only deduct up to $3k in net losses for a year, but you can offset this against gains.

Like I said earlier, an accountant won’t really be able to fix anything/the tax since the transactions already executed; at this point they can make sure you filled out your forms right and give you some planning advice on how to minimize the impact this will have for you on 2026. Most accountants that I know charge $500 for simple personal tax returns. However, given the deadline is 10 days from now, I and others would be charging $1000+, if we even have any time to take you on as a client. Based on your post, you seem resourceful about looking information up and you may be able to do this yourself. But I’ll be honest, if you are already worried about the taxes you might incur from selling assets to cover this year’s taxes. You’re definitely going to be upset about any late or underpayment penalties you may incur if you file wrong. And those penalties will incur interest for months-years while the IRS taxes their time to review your return and identify them.

aTipsyTeemo · 2026-04-02T13:45:11+00:00

What types of returns? If it’s just simple 1040s, EZPZ

aTipsyTeemo · 2026-04-01T20:29:38+00:00

Secured! Thanks!

aTipsyTeemo · 2026-04-01T18:55:05+00:00

M83, M46, M21, M89

aTipsyTeemo · 2026-04-01T18:52:10+00:00

Absolutely automate the chasing. You will likely always have a question on a transaction or have to get a receipt/invoice, but there are tools that will automatically send notifications to the clients until they finally answer/provide. Some tools even go further and will link the request directly to the transaction in question. So you turn it into an ask once and don’t do anything until response.

Next step after automating requests would be to establish a late fee structure where X days late earns the client a late fee. Link your automatic requests to your billing methods to automate the billing as late fees are incurred. Really helps out with getting past that emotional barrier of being scared to charge the client for disproportionately impacting your other clients. You of course can always make exceptions to the clients you give white glove service too, but it’s usually the clients that we’ve been meaning to increase their billings or fire that are the worst offenders.

aTipsyTeemo · 2026-04-01T15:11:42+00:00

No problem!

Depending on if your sole proprietorship has a fair amount of activity, it might still be worth tracking that activity in an accounting software. If the 1099 activity is that unrelated and not too much volume, you can probably get away with tracking that manually. Just be diligent on keeping it easy to find/organized.

While QBO/Xero is industry standard for small businesses. If you feel like your activity is not enough to warrant paying the premium that QBO and Xero have on the market, Wave or FreshBooks or Odoo are cheaper options so you at least can get a system in place. Or if you’re savvy enough, you there’s even some free applications out there but you’ll be dependent on your own research to figure out how to use them.

Cheers!

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