How to Prepare Your Business for a Financial Review or Audit

Posted on August 11, 2025

Reading time: approximately 5 minutes

When it comes to running a business, maintaining financial transparency and compliance is essential. Whether you're seeking funding, working with investors, or simply ensuring your books are in order, a financial review or audit is a critical process that every business should prepare for.

While the idea of an audit or financial review might seem daunting, proper preparation can make the process smooth, efficient, and even beneficial for your business. In this blog post, we’ll outline the steps to properly prepare for a financial review or audit, so your business can handle it confidently and without stress.

Understanding the Difference: Financial Review vs. Financial Audit

Before diving into preparation, it’s important to distinguish between a financial review and a financial audit.

• Financial Review: A financial review is less intensive than an audit. It involves an analysis of your business’s financial statements, but it’s typically more limited in scope. A financial review often involves the accountant performing procedures to ensure the financial statements are consistent with industry standards and generally accepted accounting principles (GAAP).
• Financial Audit: A financial audit is a more thorough and detailed examination of your business’s financial records. Auditors look for accuracy, compliance with tax laws, and any potential discrepancies. The goal is to provide an objective, independent assessment of your business’s financial health and operations.

Although a financial review is usually less time-consuming, the preparation steps remain largely the same for both. The key is being organized and ensuring that all your financial data is up-to-date and accurate.

Organize and Update Your Financial Records

One of the most important steps in preparing for a financial review or audit is ensuring that your financial records are organized and up-to-date. This includes everything from income statements and balance sheets to tax filings and receipts.

• Update Your General Ledger: The general ledger (GL) is the foundation of your financial records. It tracks all of your financial transactions, including income, expenses, and asset purchases. Make sure that your GL is updated and reflects all recent transactions.
• Ensure Accurate Bank Reconciliations: Regularly reconciling your bank statements with your accounting software ensures that your cash flow is accurate. Any discrepancies between your books and the bank should be resolved before an audit.
• Verify Your Accounts Receivable and Accounts Payable: Ensure that accounts receivable (AR) and accounts payable (AP) are correct. These are two of the most closely examined areas in any audit. Double-check for outstanding invoices and verify all liabilities.

Keep Your Documentation Ready

Documenting your financial activities is critical for a smooth audit process. Whether it's receipts, invoices, or contracts, auditors will require supporting documentation to verify your reported financial data.

• Invoices and Receipts: Ensure that every invoice and receipt is accounted for and accessible. This documentation proves the legitimacy of your revenue and expenses.
• Contracts and Agreements: Make sure you have copies of all contracts related to your business, including those with vendors, clients, and employees. Contracts often contain clauses that affect the financial statements and could be critical during an audit.
• Expense Reports: Organize any employee expense reports and ensure that they are aligned with company policies. Auditors will often review expenses to ensure that they are appropriate and legitimate.

Having all your financial documents in one place will help streamline the review or audit process, ensuring that you can quickly provide the necessary information when requested.

Ensure Compliance With Tax Laws and Regulations

Tax compliance is a major part of both financial reviews and audits. It is essential to ensure that your business’s tax filings are correct and up to date.

• Tax Returns: Double-check that all your federal, state, and local tax returns are filed correctly and on time. This includes income tax, payroll taxes, sales taxes, and any other relevant taxes your business may be subject to.
• Employee and Contractor Documentation: Make sure your payroll records are accurate and that all W-2s, 1099s, and other forms are filed correctly. Misreporting employee and contractor compensation is a common audit red flag.
• Sales Tax Compliance: If your business sells goods or services subject to sales tax, ensure that you’ve collected and remitted the correct amount of sales tax. Sales tax audits are common, and they can be complicated, so it’s best to be prepared.

By ensuring that your business is fully compliant with all tax laws and regulations, you can avoid issues during the financial review or audit process.

Reconcile Your Financial Statements

Financial statement reconciliation is another crucial step in preparing for a financial audit or review. Your financial statements should be accurate, balanced, and ready for examination.

• Balance Sheet Reconciliation: Ensure that the assets, liabilities, and equity reported on your balance sheet are properly reconciled with your general ledger and supporting documentation. All transactions should be properly classified and balanced.
• Income Statement Review: Review your income statement for consistency and accuracy. Ensure that your reported revenues and expenses match the source documents and reflect the correct period.
• Cash Flow Statement Verification: Your cash flow statement should align with your income and balance sheets. Ensure that operating, investing, and financing activities are properly documented and matched with bank and financial statements.

Reconciliation ensures that your financial statements are aligned with your actual financial activity, giving auditors the information they need for an accurate review or audit.

Communicate With Your Financial Team or CPA

Collaboration with your financial team or certified public accountant (CPA) is essential during the preparation process. These professionals can provide valuable insight and guidance as you prepare for the financial review or audit.

• Pre-Audit Consultation: Schedule a meeting with your CPA or financial advisor before the audit begins. This will allow you to discuss potential challenges, ask questions, and ensure that you’re fully prepared.
• Ask for Advice: If you’re unsure about certain aspects of your financial records, don’t hesitate to ask your CPA for help. They can provide advice on best practices for organizing documentation, resolving discrepancies, and ensuring compliance.
• Stay in Communication During the Process: During the review or audit, keep open lines of communication with your CPA or financial team. If any issues arise, it’s crucial to have professional support on hand to resolve them quickly.

Having the right team of professionals to assist you can ensure that your preparation process is thorough and efficient.

Conduct Internal Reviews and Spot Check Records

Before the external auditors or reviewers arrive, it’s helpful to conduct internal reviews of your financial records. Spot-checking certain areas will allow you to identify potential issues and address them before the formal review begins.

• Test Your Financial Controls: Review your internal controls to ensure that they are functioning effectively. This includes evaluating how your business handles cash flow, inventory, payroll, and other key financial processes.
• Spot Check for Accuracy: Randomly select transactions from your records to verify their accuracy. This exercise helps ensure that everything is in order and that there are no overlooked discrepancies.
• Review for Consistency: Look for consistency between your internal reports and the financial statements that are submitted to stakeholders or tax authorities. If there are any discrepancies, it’s best to resolve them ahead of the audit.

Performing these internal checks will give you the confidence to know that your financial records are audit-ready.

Preparing for a financial review or audit doesn’t have to be stressful. By staying organized, keeping your records up to date, ensuring compliance with tax regulations, and collaborating with your financial team, you can breeze through the process with confidence. Remember, audits and reviews are an opportunity to ensure that your business is operating efficiently and in compliance with financial standards, and proper preparation is the key to success.

If you’re ready to prepare for a financial review or audit and need assistance with organizing your financial documents, getting expert advice, or ensuring full compliance, get in touch with us. Our team at Golden Spark Capital is here to help you streamline your financial management and prepare for audits with ease.

Contact us today at (508) 981-2447 or email [email protected]. Let’s make sure your financial review or audit goes smoothly and efficiently!