A company is required to have a CPA audit its year-end financial statements if it needs to demonstrate conformity with what?

The requirement for a CPA to audit a company's year-end financial statements is typically linked to the need for those statements to conform to Generally Accepted Accounting Principles (GAAP). GAAP establishes a standardized framework of guidelines for financial accounting and reporting, which ensures that financial statements are consistent, comparable, and transparent for users of financial information.

When a company is required to show that it complies with GAAP, a CPA audit serves as an independent verification that the financial statements have been prepared in accordance with these principles. This enhances credibility and helps instill confidence among stakeholders, including investors, creditors, and regulatory bodies, regarding the reliability of the financial information provided.

In contrast, while tax rules, International Financial Reporting Standards (IFRS), and SEC requirements may also necessitate certain levels of scrutiny or specific reporting guidelines, the overarching standard for most U.S.-based entities remains GAAP for internal and external financial reporting. As such, demonstrating conformity with GAAP is critical to ensuring the integrity of financial statements.