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Pricing a small issuer’s 10-Q preparation budget
Even startups with little or no revenue can give accountants plenty to untangle. We developed an estimated preparation budget based on several assumptions stated below:
This is a first-time engagement; no prior-period working papers are available to gain efficiency;
We assume the client’s books are in moderate condition, and no major classes of transactions or accounts require significant rework time.
Changes in accounting standards that took effect during the period and were expected to materially impact the financial statements were already implemented.
Significant unusual transactions during the quarter were already documented in technical accounting memoranda.
No more than two rounds of comments from management, auditors, and advisers are assumed.
Initial implementation of a significant accounting standard, historical cleanup, and building a reporting process from scratch are all examples of circumstances that would materially impact our estimate.
Here is how the preparation hours are allocated:
Of the senior’s 68 hours, 32 hours cover recurring entries and supporting schedules, 16 hrs cover preparing financial statements, and 20 hours are budgeted for tie-outs and comments; managers and directors focus on accounting conclusions and review. If prior-period working papers were available, we could allocate much of this work to junior team members, with appropriate supervision.
Next, we searched for empirical evidence to support the reasonableness of this estimate. Using EDGAR, we found a few examples that provided essential support for this article. We will cover two data points below.
First, Brio Financial Group’s engagement letter with Innovation1 Biotech (from January 2025). We used hourly rates from this engagement letter in our model estimate above. The agreement also provides an $8,500 monthly retainer ($25,500 over three months) for greater accounting and reporting support. Brio charges separately for analysis of additional debt and equity raises, and significant changes in business or transaction volume could trigger renegotiation. Innovation1 Biotech is a shell with no revenue sources that is seeking a business combination; as such, it naturally requires significantly less work than an active business. As a result, our preparation estimate is about 41% higher than Brio’s three-month retainer. Additionally, a recurring package lets us charge lower hourly rates for every budgeted hour, resulting in a naturally lower fee.
Second, SurgePay's agreement with MACK Financial Solutions (from January 2026) provides for $10,000 a month in combined CFO and accounting services, equivalent to $30,000 over three months. Our $36,070 preparation estimate is approximately 20% higher. However, this is a recurring service package. If the customer terminates the agreement, the vendor can still generate revenue during the required 60-day notice period. As a result, the vendor can expect predictable monthly revenue, allowing it to offer a greater discount. SurgePays engaged the firm after its previous CFO departed. According to the Proxy Statement, the departed executive’s salary was $488,656, while MACK Financial Solutions’ annualized fees are just $120,000. The transition strongly suggests an effort to obtain financial leadership at a substantially lower fixed cost, where the discount offered by the firm played a significant role in the client’s vendor selection process.
Besides the preparation fee, the company’s reporting budget should also include costs of the auditor’s interim review, valuation support (if applicable), legal counsel, and filing services. We again reviewed EDGAR filings and noted that, for example, Nasdaq-listed 374Water reported $165,000 in audit fees and $46,000 in audit-related fees in 2025, covering its annual audit, quarterly reviews, comfort letters, etc.
Including these outside services, the illustrative quarterly cash budget is:
When developing the proposal, the following considerations should be addressed:
Separate recurring work from significant transactions. Define and include routine quarterly services in the scope. Propose additional work related to new financing rounds, major accounting changes, and cleanup services as separate engagements.
Clearly define each party’s responsibilities upfront. Specify deliverables the client must provide, together with deadlines that allow you to have a reasonable amount of time to complete the filing draft. If you later discover the client needs help with historical cleanup and reconstruction of accounting records, separate those services from recurring reporting work.
Specify task dependencies and deadlines for client schedules and supporting documents. Agree on how late inputs or changed facts affect timing and fees.
Authorize scope changes when they arise. AICPA guidance emphasizes the need for separate engagement letters and modifications of existing agreement when the scope of work expands.
Separate the calculated fee from the commercial offer. The budget should identify all of the following:
standard hourly fees,
potential efficiencies (along with the related conditions necessary to achieve those efficiencies),
negotiated discount.
Assess the effect of late changes. Late changes often require reevaluating completed work, updating corresponding disclosures, and re-performing financial tie-outs. Distinguish corrections to the firm’s own work from additional work caused by new client information to determine whether additional fees are warranted under the engagement terms.
Confirm specialist scope and fees. Explicitly identify external expert hours and fees as provisional.
Reconcile estimated hours with actual work after filing. Separate additional scope from avoidable rework and inefficient staffing. Use that record to price the next quarter.
In our experience, the best practices above can dramatically improve the client’s experience and fee discussions at each renewal date.
Rare Gems
US IPO Guide by Latham & Watkins LLP [here]
The Project “Deferred tax - tax base of assets and liabilities” Initial Meeting Paper by IFRS Interpretations Committee [here] addresses a question about the recognition of deferred taxes when a lessee recognizes an asset and liability at commencement of a lease.
ABA, Audit Responses Framework [here]
AICPA’s October 22, 2026 “Small Firm Success Series” Webinar [here]
SEC historical Form 10-Q burden estimate [here]
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