FREE 10+ Financial Audit Checklist Samples [ Internal, Management, Control ]
So many organizations view an audit as an opportunity to issue financial statements. Auditors are simply a second set of eyes who ensure the numbers being issued comply with accounting principles and are fairly stated. Auditors, however, need a place to start. What is a PBC Checklist? A PBC checklist is a list of all documentation, spreadsheets, and schedules that your auditing firm expects your organization to provide as part of your annual audit.
Your auditors should provide the checklist at least a few months prior to the start of the annual audit. If there is a change in audit standards, or even audit firms or partners, this could result in PBC modifications. The auditors may ask to look at random personnel files to ensure those are in order as well. Is updated annually to account for changes to your organization and to accounting rules and regulations. The auditors will want some items on the list before they start their process.
Ideally, all other items listed on the PBC list would be provided to the auditors by the first day of fieldwork. These include bank reconciliations, accounts receivable and accounts payable aging reports, accrual schedules, a fixed asset schedule that includes depreciation expense and a schedule of loans and loan payments, to name a few. How do PBC lists help? They help by providing the auditors with a place to start.
Since the financial statements are yours, they need those along with supporting documentation so they can design tests to prove or disprove their accuracy. The better the PBC schedules, the faster the audit. The PBC checklist helps you organize and manage your pre-audit workload, so your financial team can ensure they have addressed all requests — ideally throughout the year — but certainly before the audit begins. Then, during the audit, your team will be free to respond faster to any requests as they arise.
Need support for your next audit? If your accounting team is swamped with everyday responsibilities and you find yourself falling behind on audit preparations, it might be wise to bring in an experienced expert. First published on May 11, Post navigation.
Notes from the Field: A Financial Audit Checklist
Notes from the Field: A Financial Audit Checklist By Sangita Narang June 30, No matter why a company goes through a financial statement audit, the process is typically very stressful. Audits take place during normal business activity, pulling people and resources in different directions. They require a significant time commitment and a great deal of preparation. The ultimate goal of an audit is to receive an unqualified opinion from auditors. To serve that goal and make the preparation process easier on everyone involved, a financial audit checklist is a good place to start.
Audit Checklist Part 1: Initial Preparation Prior to starting a financial statement audit, the head of accounting should perform a critical and thoughtful review and ask key questions to assess department readiness: Are reconciliations complete and current?
Are rollforwards complete? Do schedules and analysis support the reported balances? Are there invoices, statements, shipping and receiving documents and legal agreements to support the transactions recorded?
Does the accounting system generate robust financial reports? Is the accounting staff ready to sit with auditors and answer detailed questions about processes, journal entries and documents? If the answer to any of these questions from your financial audit checklist is no, help from an outside expert should be strongly considered.
Start by reaching out to key individuals in Inventory Management and develop a detailed schedule. Notify auditors of the schedule so they can observe the physical inventory, as this is usually a significant audit area. Audit Schedule Obtain the audit schedule and a preliminary prepared by client PBC list from the audit partner.
This can be done in a variety of ways including through physical inventory or independently confirming account balances with financial institutions.
In order to prepare, a company must ensure the following: Inventory: Value the physical inventory. Make necessary adjustments between what was counted and recorded in the general ledger. In addition, adjust for shipments both sent and received that are in transit and confirm free title. Complete an obsolescence review to ensure that the inventory is valued fairly. Cash and Investments: These accounts should be reconciled on a monthly basis.
Auditors will request original statements and confirm year-end balances independently with the appropriate financial institutions. Accounts Receivable: Prepare an accounts receivable aging report by invoice and customer with consideration for collectability.
This is also an area where auditors will perform independent verification directly with customers in addition to other verification testing. Fixed Assets: These assets are generally presented in a rollforward that identifies by asset the new additions and disposals. Generally, auditors will select a sample from a listing of fixed asset additions and disposals or a fixed asset register.
Invoices, payments and legal agreements will be expected to support the amounts and ownership. As the area of fixed assets also includes the recording of depreciation, accumulated depreciation and depreciation expense accounts will also be reviewed. Prepaid Expenses: A schedule of prepaid expenses which typically includes insurance and rent should be prepared and supported. Intercompany Accounts: If there are intercompany transactions, these should be reviewed and addressed.
Expect auditors not only to validate the liabilities recorded but also to perform various tests in search of unrecorded liabilities. These tests are done by reviewing disbursements in subsequent months in order to ensure the liability is captured in the correct fiscal year. The major areas will be: Accounts Payable: Prepare an accounts payable register by customer and invoice.
Identify large dollar vendors. Accruals: Identify and prepare a list of transactions for which supporting documentation was received in the subsequent year but that actually relates to the current year. Loans: Ready financial and legal documents, as they will be inspected to support balances.
Equity Generally, there is minimal activity in the equity group of accounts. Still, expect to support all contributions and distributions. Revenue Revenue is reviewed in a variety of ways that are primarily dependent on the way revenue is generated and cash is collected. One testing method will be to develop a correlation between the revenue recorded and the cash collected on a monthly basis.
Although this area is not necessarily one that can be prepared for prior to an audit, there will be many inventory invoices and other supporting documents selected once audit field work begins.
Learn more about audits in these posts: Article.
Ideally, all other items listed on the PBC list would be provided to the auditors by the first day of fieldwork.
Free Financial Audit Checklist
These include bank reconciliations, accounts receivable and accounts payable aging reports, accrual schedules, a fixed asset schedule that includes depreciation expense and a schedule of loans and loan payments, to name a few. How do PBC lists help? They help by providing the auditors with a place to start. Since the financial statements are yours, they need those along with supporting documentation so they can design tests to prove or disprove their accuracy.
The better the PBC schedules, the faster the audit. The PBC checklist helps you organize and manage your pre-audit workload, so your financial team can ensure they have addressed all requests — ideally throughout the year — but certainly before the audit begins.
The PBC Audit Checklist—and Why You Need One
Revenue and Sales Cost Revenue is reviewed in a variety of ways that are primarily dependent on the way revenue is generated and cash is collected. One testing method will be to develop a correlation between the revenue recorded and the cash collected on a monthly basis. Costs-of-sales entries should be properly timed with associated revenue entries and checked for accuracy.
Liabilities Accruals : Identify and prepare a list of transactions for which supporting documentation was received in the subsequent year. This should include items such as funds due for earned employee wages awaiting payroll processing, vacation or sick-day earnings and bonus or commission agreements.
Things to include in a financial audit checklist
Account Payable: Check the accounts payable registry by customer and invoice. Loans : Include any loans, financial and legal documents, as they will be inspected to support balances. Contracts Add into your checklist a review of major contracts engaged by the company such as a review of major leases, purchase and sales agreementsinsurance policies or any other written company obligation.
Regulatory Compliance Verify if the financial documents are all in compliance with all regulatory agencies that govern the business. This should include the filing of local, state or federal taxes.
It should also include compliance with agencies that require periodic reporting of statistics or other actions to reduce physical risks.
8+ Financial Audit Checklist Template in PDF | DOC
What Is Task of an Auditor? A financial audit is, essentially, a process to make sure that a business is operating in a smart, legal and responsible manner financially. These audits are generally carried out by an impartial committee in the business or a financial audit can be done externally. So, what are a few of the things that need to be included in a financial audit? These documents need to be assessed in an audit to look for accuracy, compliance and accepted accounting methods.