Preparing for an annual financial statement audit does not have to begin when the auditor arrives. Some of the most effective audit preparation happens during the weeks leading up to year-end close.

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Begin by making sure bank and investment accounts are reconciled and that significant reconciling items have been investigated. Accounts receivable, accounts payable, payroll liabilities, debt, and other significant balance sheet accounts should agree to supporting schedules.

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For contributions and grants, retain supporting agreements and review whether funding includes donor restrictions, conditions, matching provisions, reimbursement requirements, or other terms that could affect accounting and financial statement presentation.

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If your organization owns property or equipment, update the fixed asset schedule for current-year purchases and disposals and retain documentation supporting significant additions.

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Board minutes are another important audit resource. Make sure minutes are complete and available for meetings held throughout the year and shortly after year-end.

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Your organization should also gather significant contracts, leases, loan agreements, grant agreements, legal correspondence, and documentation related to unusual transactions.

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Before fieldwork, review the auditor’s prepared-by-client list and assign responsibility for each item. Providing complete schedules that agree to the general ledger can reduce follow-up requests substantially.

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The goal is not simply to make the auditor’s job easier. A well-organized year-end close gives management and the board greater confidence that the financial information they rely on is accurate and complete.