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Checklist of Items Auditors Need for Initial Audit

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Small business owners may find themselves going through an audit, but if they just started the company, there's no financial history. What do they need to give their auditor? Here's a quick checklist of thirteen essential items necessary to complete an initial audit.

Jun 2nd 2021
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Auditors often are engaged to do initial audits of companies preparing to go public. Many of the latter have limited operating histories and have never been through an IRS audit, however. Your auditors are going to need a lot of information to complete the audit, and things will be much easier if clients provide the right information from the start.

So, what should they have ready?  Here is a simple list that will cover the basic needs of most clients and auditors alike:

1. General ledger

Most new companies use QuickBooks. You can easily export your general ledger to Excel or send a backup copy of your QuickBooks sheets to the auditor. The general ledger gives them a clear indication of the amount of activity they need to audit.

2. Trial balance

Auditors will absolutely want your trial balance. All of the numbers in your financial statements are traced back to this amount, and it is a key piece of information for your auditor. This, too, will come from QuickBooks or your accounting software. Some auditors strongly prefer to receive it in Excel, as they can copy it directly into the trial balance part of their electronic workpaper software. Oh, make sure you turn on the account number feature, too.

3. Copies of  loans, leases and material contracts

Accounting standards require disclosure of all loans, leases and, in some cases, material contracts. Your auditor needs copies to make sure your disclosures are complete and accurate. For example, standards require disclosure by year of your minimum required lease payments for the next five years and the minimum expected sublease payments, if any. Lease expense for all years presented must also be disclosed, and the lease is a key piece for testing that amount. Material contracts may include, but are not limited to, long-term agreements with suppliers or customers, officer employment contracts and buy-sell agreements.

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