What Auditors Look for Before They Even Start Testing
The five documents that shape your audit before a single sample is pulled
By Pennies Count
🌿 The Audit Starts Long Before Testing Begins
Most people think an audit begins when the auditor starts testing transactions.
But the truth is: your audit has already begun long before that.
Before an auditor pulls a single sample, they’re already forming an opinion about your organization’s financial health — based entirely on the first documents you provide. These early impressions determine:
• How deep they need to dig
• How much testing they’ll perform
• Whether they expand their scope
• How long the audit will take
• How much the audit will cost
Here’s what auditors review first — and what each item tells them.
📌 1. Your Trial Balance
This is the first document auditors review, and it sets the tone for everything that follows.
They’re looking for:
• Clean, logical account groupings
• Unusual balances
• Negative balances
• Accounts that haven’t moved all year
• Accounts that move too much
A messy trial balance signals risk immediately.
📌 2. Your Most Recent Bank Reconciliation
This tells auditors whether your books are grounded in reality.
They look for:
• Timely reconciliations
• Old outstanding items
• Unexplained differences
• Adjustments that appear every month
If the bank reconciliation isn’t clean, auditors know the audit will not be simple.
📌 3. Your General Ledger
The GL reveals patterns that speak directly to internal control strength.
Auditors scan for:
• Large or unusual entries
• Manual journal entries
• Repeated adjustments
• Entries posted at year‑end
• Entries posted after year‑end
These patterns help auditors assess whether your processes are consistent and reliable.
📌 4. Prior Year Audit Adjustments
This is one of the most important indicators of audit readiness.
If the same adjustments appear year after year, auditors know:
• The books aren’t being closed properly
• Internal controls aren’t improving
• The finance team may not understand the adjustments
• They’ll need to test more areas
Recurring adjustments are a major red flag.
📌 5. Your Audited Financial Statements
Auditors review last year’s statements to understand:
• Prior findings
• Areas of concern
• Material weaknesses
• Significant deficiencies
• Notes that require follow‑up
This helps them plan their testing strategy before they even arrive.
🌟 Why This Matters
If these documents are clean, organized, and consistent, your audit will be smoother, faster, and less expensive.
If they’re not, the auditor will expand testing — and that’s when audit season becomes stressful.
The good news?
You can get ahead of all of this.
📥 Next Up: Part 3
The Red Flags That Trigger Deeper Audit Testing.