Month-by-Month Launch Timeline for a New Audit Practice

Audit is a licensed, supervised activity, so the order in which you do things matters more than it does for a consultancy or a bookkeeping shop. A founder who registers the firm after signing the first engagement letter is already out of compliance in most states. The sequence below assumes a CPA (or, in the UK, a statutory auditor with Responsible Individual status) leaving a regional or mid-tier employer and starting with two to four anchor relationships. Treat the dates as planning anchors, not promises; state boards and supervisory bodies set their own processing times.

Months -3 to 0: Before you resign

• Read your employment agreement for client non-solicit language. Most mid-size firms restrict approaching clients you served for 12 to 24 months. Your plan should show revenue from new relationships, not from the book you walked away with.
• Check your state board's rules on firm names and ownership. Several boards require the firm name to be registered or reviewed before use, and most require CPAs to hold a majority of ownership and voting rights.
• Get three quotes for professional liability cover and confirm the insurer will cover attest work, not just tax and bookkeeping. Some small-firm policies exclude audits of financial institutions or employee benefit plans.
• Build the financial model. Audit billing lags fieldwork by 30 to 90 days. A model that books revenue when work is done, instead of when cash arrives, is the single most common reason first-year audit plans get sent back by lenders.

Months 1 to 2: Entity, registration, insurance

Form the PLLC, LLP or professional corporation your state allows, apply for the EIN, register the firm with the state board of accountancy, and bind the professional liability policy. In the UK, a firm applying to be a registered auditor applies through a Recognised Supervisory Body such as ICAEW, ACCA, ICAS or Chartered Accountants Ireland, and must meet that body's professional indemnity insurance regulations. If you intend to audit broker-dealers, start the PCAOB Form 1 process now, because it runs in parallel and you cannot sign those reports until approval lands.

Months 2 to 3: Peer review enrolment and quality control

US firms that perform audits or other attest work must enrol in a peer review programme within 18 months of starting attest work, according to the StartPermit 2026 accounting firm guide. Enrolling early is cheap, and an early system-review baseline shows lenders that you take quality control seriously. Write your quality management policies (the AICPA's SQMS No. 1 framework applies to firm-level quality systems) before the first engagement, not after the first review request.

Months 3 to 5: Engagement letters, first fieldwork

Sign two or three anchor clients, issue engagement letters with clear fee, deadline and information-request terms, and send the first PBC (prepared by client) lists within the first week. First-year fieldwork for a calendar-year client typically lands in January through April, so a firm that opens in September is really planning for a busy season that begins four months later.

Months 6 to 12: Hire for the busy season

Most new audit firms recruit their first senior in month six or seven, ahead of the spring rush, and bring in seasonal staff from December. The plan should show these hires as a cost step before the revenue they enable arrives, and the cash balance should still be positive in the thinnest month, usually October or November.

The takeaway for your plan: a realistic launch is a nine to twelve month build, with revenue concentrated in the first and second quarters. A forecast that spreads revenue evenly across twelve months will not match the bank statements, and an underwriter will notice.

What It Costs to Open an Audit Firm (US and UK)

An audit practice is a people business with a small asset base. There is no kitchen to equip or inventory to stock. The capital goes into carrying payroll through the billing lag, buying the workpaper and document-collection software, paying for quality-control infrastructure, and covering the regulatory fees that sit between you and your first signed opinion. Based on the line items below, a lean solo launch lands near $68,000 (about £52,000), while a four-person start with an office and a seasonal hire is closer to $185,000 (about £145,000). These are Avvale planning estimates assembled from the published fee data cited in each row, not quotes.

Line-by-line breakdown

Insurance costs deserve a note. Published guides put professional liability for small accounting firms at roughly $500 to $2,000 a year, with many one to three CPA firms paying about $1,000, per Embroker's CPA insurance cost guide. Those figures describe general accounting practices. A firm that signs audit opinions, especially on employee benefit plans or financial institutions, should budget toward the top of the range and expect underwriters to ask about your quality control documents.

The billing lag is the real startup cost

Look at the table again. Everything except payroll float is a rounding error next to a 60 to 90 day gap between starting fieldwork and collecting the invoice. An audit of a small manufacturer might take 140 hours across five weeks, get billed on delivery of the opinion, and be paid 30 days later. During those weeks your senior and staff are paid on a fortnightly or monthly schedule regardless. A founder who signs six audits in the first quarter without a credit line or cash reserve can be profitable on paper and unable to make payroll in month five. The plan section on cash flow should show the lowest cumulative cash point, the month it occurs, and what finances it.

US funding: SBA 7(a) data for CPA firms

CPA practices are an unusually bankable small-business category because revenue is recurring and client retention is high. Loan data compiled for NAICS 541211 (Offices of Certified Public Accountants) shows an average SBA 7(a) loan of about $291,000 across roughly 9,600 loans and $2.8 billion of lending, according to PeerSense's SBA lending by industry data. Most of those loans fund the purchase of an existing practice rather than a startup, which tells you something about how lenders see risk: buying a book of clients with history is easier to underwrite than a blank-sheet launch. The SBA also set the size standard for this NAICS code at $27 million in average annual receipts, so any firm you are likely to start is comfortably a small business for programme purposes.

A startup loan request for an audit firm is typically $75,000 to $200,000, secured by a personal guarantee and, where available, a lien on business assets. Lenders will ask for the founder's licence status, three years of personal tax returns, the engagement pipeline with named client types, and a two-year monthly cash flow. If you are acquiring a retiring partner's practice instead, the Journal of Accountancy's guide to bank financing an accounting practice sale is the clearest primer on how the deal is structured around client-retention earn-outs.

UK funding routes

UK founders can use a Start Up Loan of up to £25,000 at a fixed rate through the government-backed scheme, then add a business overdraft or term loan from a high-street lender. Audit founders often prefer a modest facility plus a retained cash reserve because lenders in this sector place more weight on professional indemnity cover and the firm's registered auditor status than on fixed assets. Avvale's bespoke business plan includes a bank-ready cash model with the lag and seasonality built in.

Audit Software and Tools a New Practice Actually Buys

Two decisions drive software cost: whether you want a complete engagement and workpaper platform, and whether you want client document collection handled separately. Many two-to-five person firms start with a mid-priced workpaper product and a lightweight PBC portal rather than a full enterprise suite. Prices below come from published listings and aggregator data in 2026; vendors quote on request, so use these as budget placeholders.

One buying note: a workpaper platform is a switching-cost purchase. Once three seasons of engagement files sit inside a vendor's format, moving is painful. Ask each vendor for the export format, the number of years of files you can retain after cancelling, and whether peer reviewers can be given read-only access. The Lido comparison of audit software for CPA firms is a reasonable starting shortlist, and your plan should show the chosen tool with its annual cost so a lender can see it is a recurring line, not a one-off.

If your target clients are small nonprofits, benefit plans and owner-managed businesses, you can run well on a mid-priced workpaper product, a PBC portal and a laptop per person. If you plan to take on broker-dealers or investment advisers, add a secure confirmation tool, a document-retention policy that meets PCAOB retention requirements, and time to document independence checks. These extras increase the software line by $3,000 to $8,000 a year, and they should appear in the model instead of arriving as a surprise in year two.

Licences, Registrations and Peer Review: US, UK, Australia, Canada

Audit is a reserved activity. Anyone can set up as a bookkeeper; only a licensed individual inside a registered firm can sign an audit opinion. The licensing section of the plan should name each requirement, who must hold it, what it costs, and how long it takes, because credit committees read this section to decide whether the business can legally generate revenue on day one.

United States

• CPA licence for the signing partner. A licence means 150 semester credit hours, passing the Uniform CPA Examination and one to two years of supervised experience, with exact rules set by each state board of accountancy.
• State firm registration or permit to practise. Most states require the firm itself (not only the individuals) to register, with ownership rules requiring a CPA majority. Check your state board before choosing a name.
• AICPA or state-administered peer review. Firms performing attest work must enrol and be reviewed every three years. Enrolment is about $400, with annual administration fees varying by state; Texas, for example, lists $405 a year for sole practitioners, per TXCPA's programme fee schedule.
• PCAOB registration (only if you audit issuers or broker-dealers). Registration is by Form 1, approved by the Board, plus an application fee. The fee scale is $500 for firms with zero to 49 issuer audit clients in the prior year, $3,000 for 50 to 100, $29,000 for 101 to 1,000 and $390,000 above that, per the PCAOB application fee schedule. A new firm with no issuer clients falls in the lowest tier.
• Professional liability (E&O) insurance. Not always legally mandated, but lenders and engagement letters from sophisticated clients almost always require it.
• Independence and quality management documentation. Firm-level quality management under AICPA standards, annual independence confirmations, and documented acceptance-and-continuance procedures.

United Kingdom

• Registered auditor status via a Recognised Supervisory Body. There are four RSBs for statutory audit: ACCA, Chartered Accountants Ireland, ICAEW and ICAS. A firm must apply, show it is fit and proper, pay an annual audit registration fee, hold compliant professional indemnity insurance and accept monitoring, according to ICAEW's registered auditor guidance.
• Responsible Individual (RI) for each audit sign-off. Individuals signing company audit reports need the Audit Qualification, which ICAEW states is free once awarded, a practising certificate and nomination by a registered firm.
• FRC oversight. The Financial Reporting Council supervises the RSBs and directly inspects firms auditing public interest entities.
• ICO registration and AML supervision. Audit firms are in the regulated sector for anti-money-laundering purposes, so you need a supervisor, a firm-wide risk assessment and client due diligence procedures.
• Audit exemption thresholds matter for demand. For financial years starting on or after 6 April 2025, a private company can usually claim exemption if it meets two of three tests: turnover of no more than £15 million, assets of no more than £7.5 million, and 50 or fewer employees, per Experlu's threshold summary. The move up from £10.2 million and £5.1 million shrinks the pool of statutory audit clients, a point every UK plan should address.

Australia

• Registered Company Auditor (RCA) registration with ASIC. Registration attaches to the individual. Audit firms structured as partnerships need at least one member who is a registered company auditor, and applicants must show prescribed qualifications, experience, indemnity insurance and fit-and-proper status, per CPA Australia's auditor registration guidance.

Canada

• Provincial public accounting licence. CPA bodies in each province issue the licence to practise public accounting, and firms need at least one licensed shareholder if incorporated as a professional corporation, per CPA Ontario's public accounting licence page.

The comparison in your plan should be explicit about the jurisdiction. A founder choosing between starting in Texas and Toronto faces different ownership rules, different insurance markets and a different peer review cycle. Avvale's industry template has a licensing table that you can fill in for your own region.

How an Audit Practice Earns and Keeps Money

Audit revenue is a product of hours, billing rate and realisation. A partner at $350 an hour who records 1,100 billable hours has the same top line as one at $250 an hour recording 1,540 hours, but the second partner has to manage 40 percent more workload and the staff cost that comes with it. Plans that state only an annual revenue target hide the lever that decides whether the firm is healthy. Build the model from engagement counts, average fee, and hours per engagement, then check the implied hourly rate against market data.

Published billing guides place audit, review and compilation work between $150 and $400 an hour, with $200 to $400 typical for audits and some large-firm rates up to $800, per CPARanked's 2026 rate guide. By level, staff accountants bill roughly $75 to $175, seniors $125 to $225, managers $175 to $300 and partners $250 to $600. Small and mid-size businesses commonly pay anywhere from about $10,000 to over $100,000 for an audit, depending on complexity.

Engagement types and what they pay

The fees above are Avvale planning ranges built to be consistent with published hourly rates and typical engagement hours. Your own table should replace them with prices from your local market, quoted engagement by engagement.

A year-one worked example

Take a founder-led firm in its first full 12 months with a partner, one senior, one full-time staff accountant and seasonal help. Revenue comes from nine small-company audits averaging $21,000, six employee benefit plan audits averaging $9,500, eleven reviews averaging $8,200, and $75,800 of compilations, tax and advisory work. That sums to $412,000.

The numbers show a pattern worth putting in front of lenders. A new audit firm pays its founder a market salary and has only a thin cushion left in year one. By year three, a higher ratio of staff hours to partner hours lifts the residual to the mid-teens. The year-three column assumes six staff, retention above 90 percent and no price cuts. If those assumptions are not credible for your market, show a downside case with revenue 20 percent lower and the same fixed costs; the plan then reveals how much runway you have.

Margin levers that move the result

• Realisation. If budgets assume 100 percent of standard billing and write-offs run at 12 percent, the firm gives away a month of revenue. Track budget versus actual hours per engagement from the first file.
• Staffing ratio. Partner hours on technical review and sign-off, senior and staff hours on testing. A ratio under 3 staff hours per partner hour leaves the founder doing work a $90,000 hire could do.
• Client concentration. No single client should exceed 15 to 20 percent of revenue. Losing a 30 percent client in a small firm is a restructuring event.
• Seasonality. Bring in tax, advisory and valuation support work to fill May to November, or the senior sits idle for half the year.
• Fee escalators. Include an annual rate review in every multi-year engagement letter, set at inflation plus 2 to 4 percent.

The Audit Market in Numbers: Size, Structure, Who You Compete With

IBISWorld sizes US audit services at $56.3 billion in 2025 within a wider US accounting services market of $154.9 billion, per its audit services market size page and accounting services page. A second estimate from Mordor Intelligence puts the US auditing services market at $51.88 billion in 2025, reaching $60.94 billion by 2030 at a 3.27 percent compound growth rate, per Mordor Intelligence. The two sources disagree on the base by about $4 billion, which is normal for definitions that differ on whether internal audit and assurance advisory are included. Use the range, and name the source next to the figure you use.

The same compilation shows about 50,885 CPA practices employing roughly 573,000 people and generating about $151 billion of revenue, which works out to around $3 million of revenue per firm. That average is pulled up by large firms, however; the median practice is much smaller. For a new entrant, the useful reading is that the market is fragmented, with tens of thousands of competitors and room for niche specialists.

Competitor tiers

Consolidation and what it means for a startup

The number of statutory audit firms registered with UK Recognised Supervisory Bodies fell to 3,760 in 2024 from 5,007 in 2020, a 24.9 percent drop in five years, according to the ICAEW analysis of audit firm numbers drawing on FRC data. Small firms are leaving the market because of regulatory cost and the difficulty of replacing retiring partners. That attrition creates a supply gap for owner-managed businesses that need a local auditor, and some of that work is available to a well-organised new firm. In the US, the broker-dealer audit market tells a similar story: 253 PCAOB-registered firms were in the most recent inspection data compared with roughly 800 in 2011, per Keiter's inspection summary.

The practical conclusion for a plan: the entry strategy is not to compete with large firms for the same clients. It is to take the work that is shrinking supply (retiring sole practitioners, firms that dropped attest services to avoid peer review) and to be easy to hire.

Questions Founders Ask Before Signing Up for Audit Work

Can I run an audit practice without being a CPA?

Not in the US as a signing principal. Audit and other attest opinions require a licensed CPA, and most state boards also require CPAs to own a majority of the firm. A non-CPA entrepreneur can own a minority stake in some states or run the business side of a firm whose partners are licensed, but you should check the specific state rules before committing capital. In the UK the equivalent is that audit reports must be signed by a Responsible Individual working for a registered auditor firm. If you are not licensed, the better plan is a firm that offers bookkeeping, advisory and outsourced controllership while partnering with a licensed attest firm for opinions.

How long before a new audit firm is profitable?

Most plans show a break-even month between 8 and 14, and a first full-year residual after market-rate partner pay in the low to mid single digits as in the worked example above. Firms that bring a single anchor engagement of $60,000 or more can reach break-even sooner. The slower route, building from scratch with $10,000 audits, takes two busy seasons to produce a repeatable book. The right answer for your plan is a monthly cash chart that shows the lowest point, not a single break-even date.

Do I need a PCAOB registration?

Only if you will issue audit reports on US public companies or on broker-dealers, or play a substantial role in such audits. Most small-firm audit practices do not. If you do plan to audit broker-dealers, the application fee for a firm with no issuer clients is $500, but the real cost is the compliance infrastructure and the possibility of inspection, which the PCAOB conducts on a sample of broker-dealer audits each year. A firm that wants only private-company, nonprofit and benefit plan work can skip it.

What is the difference between an audit, a review and a compilation?

An audit gives reasonable assurance that financial statements are free of material misstatement and is the highest level of assurance. A review provides limited assurance based mainly on analytical procedures and inquiry. A compilation involves presenting management's financial information in statement form with no assurance. Fees and hours rise with the level of assurance, which is why many firms use reviews and compilations as a first rung and then convert the client to audit when a lender or investor demands it.

How many staff do I need to handle ten audits?

For ten mid-sized audits averaging 120 hours each, you need about 1,200 field hours plus partner review time of roughly 15 percent. Spread over a January to April peak, that is typically a senior plus two staff accountants working full time, with seasonal support. A solo practitioner can handle three to five small engagements without staff, but will struggle to maintain independence from the work on the same file when preparing and auditing, so plan separation of duties even in a two-person firm.

Sample Plan Preview: Delgado Assurance PLLC

The extract below shows how the plan frames the opening financial picture and the executive summary for a founder-led audit firm. Delgado Assurance is a composite built for illustration.

What Is Inside the Audit Practice Template

The template follows the order a lender or a partner-in-waiting reads a plan, and every section has audit-specific prompts written by Avvale consultants:

• Executive summary with prompts for firm structure, signing partner credentials and client niche
• Services and engagement mix, including audit, review, compilation, benefit plan and agreed-upon procedures
• Client acquisition plan built on referrals from lawyers, bankers, wealth advisers and trade associations
• Quality management and peer review plan, including independence checks and engagement acceptance rules
• Staffing and utilisation model with hours-per-engagement and utilisation targets by level
• Regulatory and licensing table for your state, province or country
• Cash flow with billing lag and seasonality built in, a three-year P&L and a break-even analysis
• Risk register covering client concentration, key-person risk, malpractice claims and regulatory change

The financial forecast add-on, included in the $300 / £250 and $1,000 / £800 packages, is a five-year Excel model with the income statement, balance sheet, cash flow, break-even analysis and startup capital requirements. Related Avvale guides if your practice has a specific angle: see our pages on the accounting firm business plan template and the free business plan template hub.

Frequently Asked Questions