Concerned about the accuracy of privately held company financial statements

The majority of my customers are privately held companies. I am concerned about the accuracy of their financial statements. Should I be concerned, and what can I do about this issue?

Answer: Most privately held companies do not have audited financial statements. When reviewing unaudited financial statements, credit professionals should adopt an attitude of professional skepticism. Unfortunately, credit managers cannot independently verify unaudited financial statements. Most credit professionals know to look for obvious discrepancies, and tend to review them with caution and take whatever good news they contain with a grain of salt. Consider requiring the CFO or Controller sign the financial statements attesting to their accuracy as a way to reduce the potential for fraud.