The word “audit” might make most farmers and ranchers start to sweat, given its frequent association with the IRS, penalties, and accusations of financial wrongdoing. In the world of agricultural business, however, audits can help ag producers gain clarity on the financial state of their business and better represent themselves to lenders or potential investors.

On a recent episode of the National Land Podcast, Erik Gilliam, agricultural CPA and audit leader at Aldrich Advisors, broke down the real purpose of a financial audit for ag operations and debunked some common myths in the process.

Here’s what every landowner and farm operator needs to know!

It should be noted that every landowner’s financial situation is different, and it’s best to consult with an experienced CPA who can advise on your specific situation before acting on any information contained in this article.

What is an Agricultural Audit?

An agricultural audit from a CPA firm is NOT a government investigation. It’s a professional financial review that helps verify what your business owns, owes, and earns. This process is typically done voluntarily or at the request of a bank, investor, or shareholder. 

“An audit is really good at ensuring that the balance sheet, your assets and liabilities, is accurate at year-end,” Erik explained. “We actually verify with third parties: here’s how much cash you have, here’s how much people owe you, here’s what your inventory looks like.”

This is a critical service when you’re applying for a loan, restructuring ownership, onboarding investors, or simply trying to clean up your books and plan for growth.

Why Would You Need One?

As farming operations scale up, banks and lenders often need more than just a tax return. Erik emphasized, “Your bank is going to want more proof than a tax return. They want to see what assets you really have. That’s where we step in and provide assurance.”

Even if an audit isn’t formally required, many producers seek one proactively, especially when they need greater confidence in their numbers or want to prepare for expansion, succession, or financial risk planning. A completed audit provides third-party-reviewed financial statements, which increase your credibility with lenders and give you stronger footing in loan negotiations. It also brings clarity to your internal processes and ensures that you’re making decisions based on solid, verified numbers.

There are multiple levels of financial review available depending on your operation’s needs. A full audit is the most in-depth and includes hands-on testing, verification of inventory, and external confirmations. A review, on the other hand, is based more on inquiries and analytical procedures; it looks at trends, asks pointed questions, and checks for inconsistencies without digging as deeply. The most basic option is a compilation, where your numbers are organized into formal financial statements without the testing or questioning of an audit or review.

If you’ve got questions about an audit for your ag-business, your local Land Professional can help put you in contact with an experienced CPA and many other types of service providers!