Financial Statement Review Checklist

Export the period-end TB from the GL (QuickBooks, Sage Intacct, NetSuite) along with the AR aging, AP aging, fixed asset roll-forward, and bank reconciliations. Save to the close binder so the reviewer is working off the same set as the auditor.

Tie operating cash to bank statements and tie the firm's house custody balances to Schwab / Fidelity / Pershing month-end statements. Outstanding fee receivable from custodian fee debits is the most common reconciling item — confirm timing rather than booking a true-up.

Lock the prior period in the accounting system before review begins so journal entries don't drift mid-review. Any post-close adjustments must go through the standard JE approval workflow.

Confirm every cash GL account ties to a completed bank rec with reconciling items aged under 30 days. Stale uncleared items over 60 days are an audit flag and usually mean a void or stop-pay was missed.

Most advisory fees are debited from client accounts at the custodian, so receivables should be small and current. Anything in the 60+ bucket usually means a billing instruction never made it to the custodian — chase before period-end so the next quarter doesn't compound.

Reconcile beginning balance + additions − disposals − depreciation = ending balance. Confirm capitalization threshold is applied consistently (typical RIA threshold: $2,500–$5,000) and that retired laptops / furniture have been removed, not just fully depreciated.

Validate accrued bonus, deferred comp, payroll tax, and benefits accruals against payroll provider reports. Note any open litigation or regulatory matters from the CCO log that may require a contingent liability or disclosure under ASC 450.

Tie member capital accounts (or shareholder equity) to the operating agreement's distribution waterfall. Quarterly partner distributions are a frequent classification error — confirm they're booked to equity, not expense.

Under ASC 606, advisory fees are recognized over the service period — most firms recognize ratably across the quarter rather than on the billing date. Confirm the policy in the close memo matches what the GL is doing and that any performance-fee crystallization at quarter-end is recognized in the right period.

Reconcile salaries, advisor revenue-share, bonus accruals, and 401(k) match to payroll reports. Revenue-share splits with W-2 advisors and 1099 IARs hit different lines — make sure the classification matches the contract.

Run a quarter-over-quarter and year-over-year P&L. Flag any line that moved more than 10% or $25K in absolute terms. Common drivers: market-driven AUM swings on the revenue side, conference / T&E spikes on the expense side, technology contract renewals.

For each flagged line, capture a short narrative tying the variance to a known driver (AUM growth, new hire, vendor change, one-time item). The auditor will ask about every variance over threshold — pre-document to save time during fieldwork.

For pass-through entities (LLC, S-corp), confirm there is no entity-level federal tax accrual but state PTET (pass-through entity tax) elections are accrued correctly. For C-corps, tie the provision to the rolling tax projection from the firm's tax preparer.

Walk net income to operating cash flow through working capital changes. The most common mistake is forgetting to back out non-cash items like stock-based comp or deferred rent — both common at firms with equity-vesting partner buy-ins.

Capex is usually small at an RIA — laptops, office build-out, technology platform implementations (Salesforce FSC, Black Diamond, Orion). Acquisition or book-of-business purchases also flow here; confirm they're separated from operating activities.

Document any draws or paydowns on the firm's revolving line, partner capital contributions, and member distributions. Confirm the distributions tie to the equity reconciliation completed earlier in the review.

Beginning cash + net change = ending cash, and ending cash should match the balance sheet to the penny. Any rounding differences mean a category misclassification — fix before sign-off rather than disclosing in the notes.

Confirm the policies note covers revenue recognition under ASC 606, lease accounting under ASC 842, and any equity-method investments. Roll forward last period's note rather than rewriting; only flag changes for additional review.

Common related-party items at advisory firms: rent paid to a partner-owned LLC, soft-dollar arrangements, affiliated fund management fees, and loans to/from partners. Each needs disclosure of the relationship, terms, and balance.

Review through the financial statement issuance date for material events: large client departures, regulatory exam openings, key-person departures, M&A activity. Document the cutoff date in the close memo.

Distinguish recognized (Type I — condition existed at period end) from non-recognized (Type II — arose after) under ASC 855. Type II events are disclosed but don't adjust the financials; the wrong classification is a common audit comment.

Confirm Level 1 / 2 / 3 hierarchy classification for any house-account holdings, deferred comp investments, or seed capital in firm-managed funds. Level 3 holdings need a roll-forward and valuation methodology disclosure.

Tie the AUM figure used in management fee revenue to the regulatory AUM that will be reported on the next ADV amendment. Differences usually come from non-discretionary assets or family / employee accounts that are billed differently than reported.

If the firm has custody under Rule 206(4)-2 (including SLOA arrangements that meet the no-action conditions), confirm the surprise exam scope ties to the year-end balance sheet. State-registered RIAs: confirm minimum net worth / bond requirements per state are met.

List every adjusting JE booked during review and every prepared-by-client item still open for the auditor. The cleaner this list, the shorter audit fieldwork — auditors charge for chasing.

CFO certifies the numbers are accurate; CCO certifies that no regulatory or compliance matter requires accrual or disclosure beyond what's in the notes. Both signatures are retained in the close binder for the auditor and for SEC books-and-records.