Annual Financial Statements Checklist

Verify AR, AP, inventory, fixed assets, and payroll modules are all closed for the fiscal year. In QuickBooks Online, NetSuite, or Sage Intacct, an unclosed sub-ledger lets late entries trickle in after you've started drafting and forces re-runs of the trial balance.

Set the close date and password (QBO) or restrict the period (NetSuite, Sage Intacct) so only authorized users can post adjusting entries to the closed year.

Review prior-year financials, the auditor's management letter, and any unadjusted-difference schedule. Note carry-forward issues — uncorrected misstatements, control deficiencies, going-concern language — so this year's draft addresses them rather than repeating them.

Use last year's PBC as the starting template; auditors will send the current-year update, but starting early on items that don't change (org chart, debt agreements, lease schedules) shaves weeks off fieldwork.

Export the WTB to Excel or your engagement software (Caseware, CCH ProSystem fx Engagement). This is the audit-traceable source of truth — every line on the financial statements ties back here.

Accrue wages earned but unpaid as of fiscal year-end (mid-pay-period cutoffs), employer payroll taxes on the accrual, vacation liability, and any declared but unpaid bonuses. Each AJE needs a memo and supporting workpaper — partners block close on AJEs that lack documentation.

Run the fixed-asset roll-forward, post current-year depreciation per Form 4562 schedules, and amortize prepaids, intangibles, and right-of-use assets (ASC 842 leases). Tie ending NBV to the depreciation schedule.

Run the AR aging, AP aging, and inventory valuation report; each total must equal the related GL control account to the penny. Differences usually trace to journal entries posted directly to the control account instead of through the sub-ledger — investigate before signing off.

Compare every GL account current vs. prior year. Flag any line item with >10% variance or >$25K absolute change for explanation. Auditors will run this same analytic — you want answers ready, not surprises during fieldwork.

For each flagged variance, write a one-paragraph explanation citing the underlying business event (new customer, price increase, asset disposal, accounting policy change). Attach supporting documents to the workpaper so the auditor's analytical-review tickmark resolves on first pass.

Group accounts into the standard classifications: current vs. non-current assets and liabilities, equity sections. Confirm assets equal liabilities plus equity to the penny — a $1 difference usually means a rounding error in a footnote-driving sub-schedule.

Choose the presentation format (single-step or multi-step) consistent with prior year. Reclassify any misposted items between COGS and operating expenses; gross-margin shifts are the most common partner-review note.

Indirect method is standard for most SMBs. Reconcile net income to operating cash flow; ending cash on the SCF must equal cash on the balance sheet. Non-cash items (depreciation, stock comp, lease expense) are the usual reconciliation gaps.

Roll forward each equity component from beginning balances: common stock issuances, dividends declared, share repurchases, AOCI movement, retained-earnings change. Tie ending RE to the balance sheet.

Standard sections: nature of business, summary of significant accounting policies, revenue recognition (ASC 606), leases (ASC 842), debt, income taxes, commitments and contingencies, subsequent events, related-party transactions. Use the prior-year footnotes as a starting template, then update for current-year activity and new pronouncements.

Every line on each statement and footnote table must trace to the WTB with a tickmark. Use Caseware or Excel cross-reference formulas; broken links between draft statements and the TB are the #1 reason audit reviewers send drafts back.

Use the AICPA or PPC disclosure checklist matching the framework selected. Check off every item or document why N/A. New-pronouncement items (current-year ASUs) are the most common miss — adoption disclosures get skipped when the change is immaterial but disclosure is still required.

Package: draft financials, footnotes, disclosure checklist, and the variance-explanation workpaper. Partner reviews for technical accuracy, presentation consistency, and footnote completeness before the package goes to the auditor.

Work each review note to clearance: update the draft, document the change in the workpaper, and respond inline so the partner can re-review only the deltas.

Mark each item complete only when the underlying file is final — partial uploads create version-control problems. Auditor will lock items as accepted; reopened items mean rework on both sides.

Allowance for doubtful accounts, inventory reserves, warranty accruals, deferred tax valuation, ASC 842 incremental borrowing rate. Have the methodology memo and supporting data ready; estimates are where audit findings concentrate.

Auditor presents the schedule of proposed adjustments (PAJEs) and unadjusted differences. Evaluate each: agree and book, dispute with supporting analysis, or pass as immaterial (goes on the SUD schedule for management rep letter).

Record agreed AJEs with full memo referencing the audit workpaper number. Re-run the trial balance, re-tie the statements, and re-circulate to the partner — every AJE post means the prior tie-out is stale.

CEO and CFO sign the rep letter dated the same date as the audit report. Verify the SUD schedule attached to the rep letter matches the auditor's final list — mismatches delay opinion issuance.

Walk the audit committee through the financials, key estimates, audit findings, and management letter comments. Auditor typically presents the required communications (AU-C 260) in executive session. Capture approval status, board signature, and meeting minutes for the audit file.

SEC issuers file 10-K via EDGAR. Private companies file with state regulators, lenders (per debt covenants), bonding companies, or franchisors as required. Confirm covenant-compliance certificate ships with the lender package.

Distribute via the secure portal (SmartVault, ShareFile, Liscio) — never unencrypted email. Confirm distribution against the contractual recipient list; missed lenders trigger covenant defaults independent of financial performance.

Lock the engagement binder in Caseware or CCH Engagement. Retention is seven years for tax-related working papers (IRC 6501 statute plus buffer); SOX issuers retain audit workpapers seven years per Section 802. Document the archive date and the retention-expiry date in the engagement record.