When you decide to sell your company, one of the first things buyers will ask for is your financials — and not just your internal statements. They want independent verification. That’s where financial audits and reviews come into play.
For founders, these terms can sound intimidating or expensive, but they’re critical tools in building credibility. The right level of financial verification can accelerate due diligence, prevent renegotiations, and, in many cases, increase valuation.
At Legacy Advisors, we’ve seen both sides: companies that enter diligence with audit-ready books and those that scramble to justify their numbers. Guess which ones close faster and at higher multiples?
Why Buyers Care About Verified Financials
From a buyer’s perspective, risk reduction drives everything. Financial audits and reviews provide independent assurance that your numbers are accurate, your accounting methods are sound, and your internal controls are reliable.
Buyers depend on these reports because they:
- Confirm accuracy: Independent accountants validate that your financials reflect reality.
- Build trust: Third-party verification reduces perceived risk.
- Shorten diligence: Buyers spend less time verifying data when an audit or review exists.
- Increase valuation: Credible numbers justify higher multiples and smoother closings.
In The Entrepreneur’s Exit Playbook, I stress that preparation is leverage. Having verified financials is one of the most powerful forms of leverage you can bring to the table.
Audit vs. Review: What’s the Difference?
Both audits and reviews involve independent accountants, but the level of scrutiny and assurance differs.
- Audit:
A full audit provides the highest level of assurance. The auditor examines financial statements, tests transactions, confirms balances, and evaluates internal controls. They issue an opinion stating whether your financials fairly represent the company’s condition according to accounting standards (GAAP). Audits are thorough and carry significant weight with buyers, lenders, and investors. - Review:
A review offers limited assurance. The accountant performs analytical procedures and inquiries but doesn’t test underlying data. Reviews confirm that nothing has come to the accountant’s attention suggesting the financials are materially inaccurate. Reviews are faster and less expensive than audits, but provide less certainty.
The right choice depends on your company’s size, complexity, and buyer expectations.
When a Review Is Enough
For smaller or mid-sized businesses with straightforward operations, a financial review is often sufficient. Reviews validate your accounting without the cost and depth of a full audit.
Buyers in these cases typically understand that the company hasn’t been audited but still want some level of external verification. A well-prepared review shows financial discipline and readiness for diligence — it tells buyers that your books are clean, organized, and trustworthy.
If you’re earning under $10 million in annual revenue and have consistent, GAAP-compliant reporting, a review may meet buyer expectations and streamline the process.
When an Audit Makes Sense
Larger businesses, complex corporate structures, or companies courting institutional or strategic buyers usually benefit from a full audit.
Audits provide maximum transparency and minimize the need for buyers to perform their own exhaustive financial validation. They’re especially valuable when:
- Your buyer is a private equity firm, public company, or strategic acquirer.
- You have multiple subsidiaries, revenue streams, or international operations.
- You expect a high-value deal where even small errors could affect millions.
- You want to signal top-tier professionalism and reduce the likelihood of retrades.
Audited financials tell buyers, “You can trust what you see.” That trust translates into smoother diligence and stronger offers.
Lessons From Experience
When I sold Pepperjam, our clean, GAAP-compliant financials were key to closing quickly and confidently. Even though we weren’t initially audited, we invested in professional accounting reviews well before going to market. That foresight eliminated surprises and allowed us to control the narrative.
Through Legacy Advisors, Ed and I have advised dozens of founders who underestimated how much verified financials influence buyer confidence. Deals with reviewed or audited financials tend to attract more bidders and close faster. Those without them often face re-pricing and painful renegotiations.
Cost vs. Return
Yes, audits and reviews cost money. But think of them as investments, not expenses.
A full audit might run tens of thousands of dollars, depending on your company’s size. But if it reduces friction, prevents a valuation haircut, or speeds up closing by even a few weeks, the ROI is enormous. Reviews are less expensive but still deliver meaningful value, especially for smaller businesses.
Ultimately, you’re buying confidence — your own and your buyer’s.
Preparing for Either
Whether you pursue an audit or review, preparation is everything. Here’s how to make the process smooth:
- Clean up your books. Separate personal and business expenses, reconcile accounts, and fix inconsistencies.
- Organize documentation. Keep contracts, bank statements, and tax filings accessible.
- Standardize reporting. Ensure consistency across months and departments.
- Work with a reputable CPA. Choose accountants experienced in your industry and M&A transactions.
- Start early. Don’t wait until diligence — verification should happen months or even years in advance.
By starting early, you’ll have time to address any findings before buyers ever see them.
Final Thoughts
Whether you need an audit or a review comes down to your goals, your size, and your buyer. Reviews show professionalism; audits show excellence. Both demonstrate readiness.
Buyers pay more for clarity and confidence. Independent financial verification gives them both. If you’re serious about a premium exit, don’t leave financial transparency to chance.
Find the Right Partner to Help Sell Your Business
At Legacy Advisors, we help founders prepare for exit by strengthening financial transparency, coordinating with accountants, and positioning companies for top-tier buyers.
Visit legacyadvisors.io to connect with our team, listen to the Legacy Advisors Podcast, and explore insights from The Entrepreneur’s Exit Playbook. Together, we’ll ensure your business is ready to exit with confidence and credibility.
Frequently Asked Questions About Audits and Reviews Before an Exit
What’s the main difference between a financial audit and a review?
The difference comes down to the level of assurance. A review offers limited assurance through analytical procedures and inquiries — it confirms that nothing appears materially wrong in your financials. An audit, on the other hand, provides the highest level of assurance. The auditor tests transactions, verifies balances, and evaluates internal controls before issuing an opinion on whether your financials fairly represent the company’s condition. Reviews are faster and less expensive, but audits carry more weight with buyers and investors who want full transparency.
Do all buyers require audited financials?
Not always. The need for an audit depends on the type of buyer and the size of the deal. Strategic acquirers, public companies, and private equity firms often expect audited statements because they rely on that level of verification for internal reporting and compliance. However, smaller or mid-market buyers are often satisfied with reviewed financials — as long as your accounting is GAAP-compliant and your books are clean. What matters most is credibility. Whether you choose a review or audit, it should be performed by a reputable accounting firm with M&A experience.
How far in advance should I plan an audit or review before selling?
Ideally, you should plan at least a year — and preferably two years — before going to market. Buyers like to see consistent, verified financials over multiple reporting periods. Early preparation gives you time to fix any issues the accountants uncover, organize your documentation, and build a track record of transparency. Waiting until diligence to start the process is a mistake; it creates stress, delays, and can trigger retrades. Verified financials developed over time make you look prepared and professional from day one.
How do verified financials impact valuation and buyer confidence?
Independent verification reduces perceived risk, and lower risk means higher valuation. When buyers know your numbers are reliable, they’re less likely to discount for uncertainty. Audited or reviewed statements also make diligence faster and smoother, since buyers don’t need to recreate or revalidate your data. It’s not uncommon for companies with audited financials to attract more bids or better offers simply because buyers trust the numbers. Transparency builds leverage, and in M&A, leverage often translates directly into dollars.
How can Legacy Advisors help me determine which option is best for my business?
At Legacy Advisors, we help founders assess their readiness for sale — including what level of financial verification makes the most sense. Drawing on lessons from The Entrepreneur’s Exit Playbook and real-world deal experience shared on the Legacy Advisors Podcast, we guide clients through audit versus review decisions based on company size, buyer type, and transaction goals. We also coordinate with your accounting team to ensure the process strengthens your valuation story rather than slowing it down. Our goal is to help you build confidence with buyers long before diligence begins.