INSIGHT

How to Prepare for a Financial Audit: A Practical Checklist

Erick Rivera • October 21, 2026

Services: Audit

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A financial statement audit runs smoother when the groundwork starts long before the auditors arrive. Whether this is your first audit or your tenth, the companies that experience the fewest surprises are the ones that treat audit readiness as an ongoing discipline, not a scramble in the final weeks. This checklist walks through how to prepare for a financial audit once you’ve engaged an auditor, so your team and your engagement team can move through fieldwork efficiently and with confidence.

Establish a Timeline & Assign Roles 

Before fieldwork begins, build a shared timeline with your auditor that covers your internal book-close schedule, key audit request due dates, and the expected issuance date. If physical observations are part of the engagement, coordinate those dates early as well. Just as important is deciding who owns what internally:

• Identify who will serve as the main point of contact for the audit. 
• Establish communication preferences and a meeting cadence, including who should be involved in each touchpoint. 
• Designate who addresses specific audit requests, and set internal deadlines that align with your auditor’s timeline. 
• Ensure that those individuals have enough bandwidth to see the audit through to completion. 

You should also request a preliminary Prepared-By-Client (PBC) list as early as possible. Reviewing the auditor’s information requests in advance gives your team time to gather supporting documentation and identify potential gaps before fieldwork begins. 

Document Internal Control Over Financial Reporting 

Auditors need to understand how your financial information moves through your organization. Many growing companies haven’t formally documented this, so this step often involves collaborating with your auditor to capture it during a walkthrough. At a minimum, be ready to address: 

• Process documentation for major accounting cycles, such as procurement, disbursements, revenue recognition, and cash receipts, including who owns each process and what key controls are in place. 
• The IT systems used in your financial reporting process. 
• Access controls that define who can view or change financial data. 

Complete Account Reconciliations & Financial Close 

Your financial close process should be finished, or nearly finished, before the auditors start their work, which is much easier when your monthly financial close runs on a consistent schedule all year. This means: 

• Posting final journal entries and retaining evidence of preparation and approval, often available in your accounting system’s audit logs. 
• Preparing account reconciliations for all accounts and retaining copies for the audit. 
• Keeping documentation of who prepared and approved each reconciliation, which supports the auditor’s walkthrough of your internal controls. 

If you’re preparing for a first-year audit, also be prepared to support opening balances and significant historical transactions. Auditors may need to understand transactions that occurred before the current audit period to establish beginning balances and evaluate the completeness and accuracy of financial records. 

Review Significant or Unusual Transactions 

Judgment-heavy areas deserve attention before fieldwork begins, not during it. Evaluate whether you need third-party specialists for technical accounting matters or valuation services tied to significant estimates, and complete that work ahead of the audit if so. You’ll also want a tax provision ready, or a tax specialist engaged to prepare one. Pay particular attention to significant or unusual transactions that may require additional accounting analysis or supporting documentation, such as: 

• Debt or equity financing arrangements 
• Stock-based compensation arrangements 
• Business combinations 
• Significant customer or supplier contracts 
• Revenue recognition policy. 
• Impairment analysis for goodwill or intangible assets. 
• Estimates involving significant judgment, pending or threatened litigation, and any going concern considerations. 

Prepare a List of Related Parties 

Related party transactions are a routine area of audit focus, so get ahead of it. Identify every related party transaction entered into during the year, along with any amounts owed to or due from related parties as of the balance sheet date. Retain copies of any agreements tied to those transactions. 

Organize Supporting Documents 

Auditors will request a range of supporting materials, and locating them quickly depends on how well you’ve organized your records throughout the year. Common requests include: 

• Bank statements, downloaded ahead of time. 
• Board minutes. 
• Payroll records. 
• Documentation of change management, including who can make or authorize system and process changes. 
• Equity records, including capitalization tables, stock option grants, financing agreements, 

Address Subsequent Events & Draft Financial Statements 

Identify any material events that occurred after year-end through the date your financial statements are issued, and be ready to discuss them with your auditor. If you’re preparing draft financial statements internally, get a head start: complete a disclosure checklist early to catch any gaps, and factor in recent accounting pronouncements that may require new disclosures. 

How BPM Can Help 

Preparing for a financial statement audit takes coordination across your finance team, and having a knowledgeable partner in your corner makes the process considerably less stressful. BPM’s audit services work alongside organizations at every stage, from building the initial timeline to helping close out fieldwork, so your team walks into the audit prepared rather than reactive. Contact us to talk through what your next audit cycle should look like.