Key items covered in this article:

  • Purpose of Audit/AUP: An audit or agreed-upon-procedure (AUP) engagement provides assurance to the North Carolina Licensing Board for General Contractors that applicants have the financial strength to complete projects.
  • Cost-Effective Alternative: AUP engagements are often a more affordable and efficient option compared to audits or surety bonds, especially for new businesses or those using simplified accounting methods.
  • Steps for Success: Key steps include understanding working capital requirements, simplifying calculations, and engaging a CPA experienced in AUP engagements for contractor licensure.


You’ve worked hard. You have experience and passion, and you’re ready to take the next step in your career by applying for licensure as a North Carolina general contractor.  

Often, as contractors work on satisfying requirements of the North Carolina Licensing Board for General Contractors (the Board), questions arise at the mention of an audit or agreed-upon-procedure (AUP) engagement. 

In this article, experts from the construction and real estate team at PBMares provide an overview of the purpose of such a requirement and the procedures involved. 

Why Does a General Contractor Need an Audit/AUP to Obtain Licensure? 

An audit or the performance of AUPs provides assurance and reliability to the Board — and the general public — that you have the financial strength to see a project through. 

One alternative to the audit or AUP is obtaining a surety bond. However, because the bond costs can exceed ten percent of the face value ($10,000 for an unlimited license), having an audit or AUP performed is generally more cost efficient, and a one-time expense. 

What Is Involved in an Audit/AUP to Become a Licensed General Contractor in North Carolina?  

Audits or AUPs are financial services provided by a CPA firm, under required professional standards.  

The CPA obtains your financial information, subjects it to varying levels of testing, and concludes whether the financial information is fairly stated and/or in accordance with prescribed requirements.  

Audit procedures vary based on the size and complexity of an entity and can quickly become a costly exercise. If you are a new business or use a simplified method of accounting (like cash or tax basis), AUPs can be a better way to prove you have sufficient levels of working capital as required by the Board. At PBMares, we understand that an expensive audit is a hurdle for many applicants. That’s why we recommend an AUP engagement for many applicants, to keep time and costs to a minimum. 

3 Key Steps for an Efficient General Contractor Licensure AUP in North Carolina 

  • Step 1: Know your working capital.  Working capital is calculated as all current assets, less all current liabilities, as of a specific date. Current assets include cash and other assets expected to be converted to cash within a year (i.e. most receivables and inventory). Property, plant, and equipment or receivables not expected to be collected within a year would not qualify. Current liabilities are those expected to be paid within a year (i.e. accounts payable, accrued payroll, and some lines of credit). The Board requires different minimum amounts of working capital depending on the type of license you are applying for. 
  • Step 2: Simplify the calculation. Choose the right date. Generally, any day in the previous six months is acceptable, but the more recent the better. Factors to consider include aligning the day to match the bank statement date, or whether moving it a day or two would simplify the working capital calculation (accrued payroll paid with cash – no effect on working capital, but one less item to subject to procedures). The more components the calculation includes, the more work is involved in performing the AUP.  
  • Step 3: Engage a CPA with appropriate experience. Many CPAs may not perform AUP engagements under professional standards as required by the Board. Ensure you find one that is experienced with these engagements and can guide you through the process quickly and knowledgeably.  

Learn More 

PBMares’ construction specialists, Lars Isaacson, CPA , and Jennifer French, CPA, work with clients ranging from first-time applicants to million-dollar organizations throughout the Eastern United States. In North Carolina, we have offices in Wilmington, Morehead City, and New Bern. 

If you are ready to apply for a general contracting license in North Carolina, the experienced CPAs at PBMares can guide you through the requirements and partner with you to complete the AUP in the most efficient and cost-effective way. Contact us today.