Shippers should mandate their freight payment solutions produce externally audited financial statements on an annual basis as part of their due diligence. These documents provide shippers with external validation of several important points:
1. There is an accounting structure that can be relied upon for financial accounting.
2. The provider is making money and less likely to go out of business or be tempted to use customer funds for nefarious purposes.
3. Provides insight into sources of income and other businesses in which the provider may be engaged which may be of concern.
4. In the event of fraudulent activity or bankruptcy of the provider, financial statements can be relied upon to show the flow of monies and assist shippers in recovery efforts.
As part of a standard audit of financial statements, the independent auditor will test the basic control structure of the provider. The results of those tests will tell the auditor if the control structure can be relied upon in the preparation of the financial statements. If the control structure cannot be relied upon and additional testing does not give the auditor comfort, the financial statements will not have an auditor’s opinion. Rather, they will have something called a “disclaimed” opinion.
The vast majority of public accounting firms can perform a high quality financial statement audit. A little due diligence by a customer regarding the accounting firm might be important for a customer if he wishes to ensure that the auditor is strong enough to conduct a thorough examination. However, the rules around audit engagements are extremely strict. A public accounting firm rendering an audit opinion has to comply with the same set of standards regardless of whether they are one of the largest firms or a regional firm. Further, all firms engaged in such attestation work are subject to strict “peer reviews” to ensure continuing quality of work.
Download our Due Diligence Checklist by accessing our Whitepapers link.