If you’re a contractor in Tennessee you are likely aware that there are several steps to obtaining a Tennessee contractors license. Step one is testing. Once you’ve registered for your examinations, passed the Business and Law exam (which is required for all contractor license applicants), and passed a Trade examination (if applicable based on the type of license classification requested) you’re ready for the second step.

Step two per the Tennessee regulatory board is obtaining a financial statement. The law requires an Audited or Reviewed financial statement. For an initial Tennessee contractors license, a contractor must provide a reviewed financial statement for monetary limits less than $3 million. For monetary limits greater than $3 million, an audited financial statement is required. Below is a snip of the rule directly from the Tennessee commerce regulatory boards’ guidance.

Like many people, you may be wondering what the difference between an audit and a review is. At a high level, an audit offers the highest level of assurance that financial statements are free from material misstatement. An audit is a more in-depth engagement in which the CPA gathers sufficient and reliable evidence to support the opinion given. As such, an audit will usually result in a substantially higher cost to the client than a review.

A review is an engagement that has a narrower scope than an audit in that inquiry and analytics are performed, but detailed testing of financial statement accounts does not occur. Furthermore, a review provides limited assurance that the financial statements are free from material misstatement.

To determine which engagement is right for you, consult your CPA as you are beginning the application process.

Resources:

Applications can be found here: https://apps.tn.gov/licenses-app/#~Contractors~Home~Improvement~

Monetary limit increases can be requested here: https://www.tn.gov/content/dam/tn/commerce/documents/regboards/contractors/forms/ContBLC-IncreaseMonetaryLimit.pdf