When Should You Start Preparing for an Audit? (Hint: It’s Earlier Than You Think)
The Wake-Up Call Every CFO Gets Too Late
If you’re leading finance at a high-growth startup, here’s a hard truth: Audit season starts long before January.
By the time the PBC list (Prepared By Client request list) hits your inbox, you’re already behind. What should have been a steady process becomes a sprint, and every day lost in prep can push your audit.
Whether your audit is 3 months away or 10 months away, here's what to prioritize now to make the process smooth and stress-free. As Kyle Geers, our Co-Founder, often reminds clients, “The best fundraising and audit outcomes don’t come from the strongest growth story; they come from the cleanest books.”
Why “Start Early to Finish Strong” Works in Audit Prep
Audit readiness isn’t just about being compliant; it’s about preserving momentum. Teams that “start early to finish strong” avoid the chaos of last-minute fixes. In our recent video, Kyle and Danielle broke this down with a simple analogy: treat audit prep like dental hygiene. If you handle the small cleanings throughout the year, you avoid the root canal later.
That “root canal” moment, the scramble to reconcile accounts, write memos, and defend every number, is what costs startups most. Early preparation saves both time and money by allowing teams to:
Identify high-risk areas (revenue recognition, leases, stock comp) early
Spread work over several months instead of cramming it into Q1
Collaborate effectively with auditors instead of reacting under pressure
Catch the full video below:
The Four Phases of Audit Readiness
If you haven’t yet completed our audit readiness assessment, now is the time, as it highlights process gaps before the auditors do.
Here’s a practical audit readiness checklist that helps startup finance leaders plan ahead:
Phase 1: Year-Round Maintenance
Objective: Build audit-ready habits throughout the year
Review prior audit notes and board feedback
Maintain clean books with accrual-based accounting throughout the year
Keep organized records of contracts, policies, and equity documents as transactions occur
Document any changes from prior year as they happen (e.g., if capitalization thresholds shift, explain why immediately)
Perform regular monthly or quarterly balance sheet reconciliations to catch errors early
If you’re short on bandwidth, this is the ideal time to bring in a fractional controller or technical accounting partner
Phase 2: Pre-Fiscal Year-End (Final 4-6 Weeks)
Objective: Address technical topics early to reduce audit fees and avoid peak-season stress
Reconcile every material balance sheet account
Review capitalization policies, lease schedules, and revenue contracts
If anything changed from the prior year (e.g., capitalization thresholds shifted from 5 years to 3 years for vehicles, or leases were renewed), prepare explanations for why. Auditors will ask, and having the reasoning documented shows rigor and intent, not inconsistency.
Start preparing documentation and support files
Review and document capitalization policies, lease schedules, and revenue contracts. If anything changed from prior year, have explanations ready.
Identify technical accounting areas (ASC 606, ASC 842, stock comp) needing documentation. Check out our Audit Prep Checklist to help you out
Coordinate with auditors to conduct interim testing and to review the first three quarters early
Schedule recurring auditor touchpoints to keep communication clear
Not sure where to start? Read “Don’t Know Where to Start With Audit Prep? Ask These 3 Questions First” to assess your current audit readiness and identify the right priorities before building your checklist.
Phase 3: Post-Fiscal-Year End (Weeks 2-4 After Close)
Objective: Final coordination before auditors arrive
Compile your final PBC list with trial balance and GL
Ensure all technical memos and supporting documentation are complete and organized
Verify all balance sheet account reconciliations are finalized with supporting detail
Verify all supporting documentation is properly supported
By now, your team shouldn’t be “getting ready”; they should be ready.
Phase 4: During Audit
Objective: Stay proactive and collaborative
Hold weekly calls with auditors to align priorities and address bottlenecks early
Keep version control clean for audit support
Track open items in a shared audit tracker
As our team likes to say, “Don’t fly the plane and rebuild it midair.” Integrate improvements before the audit, not during.
The Real Cost of Waiting
From our experience working with startups, CFOs who delay audit prep until Q1 face three predictable consequences:
Higher Audit Fees: Rates spike in busy season, and rework multiplies the cost.
Burned-Out Teams: Already lean teams take on 20+ extra hours a week chasing support.
Missed Funding Milestones: Every delay can erode investor confidence.
Think audit readiness is expensive? Try going through an audit without it.
How Zeroed-In Helps You Start Early to Finish Strong
Zeroed-In’s audit readiness process was built for lean startup finance teams. We:
Scope risk areas early with a GAAP lens to eliminate last-minute surprises
Draft audit-ready memos that align with auditor expectations
Act as translators between your team and the audit firm, cutting confusion and rework
Provide fractional controllership to bridge staffing gaps through the audit period
We’ve seen hundreds of audits. We know the pressure. And we know how to make the process painless.
“They were able to take multiple years of our financials that were historically done on a cash basis and convert them to US GAAP, increasing the confidence and accuracy in our numbers. They served more than just typical transactional accountants but rather as a partner during the process.” –Neha Kumar, COO of Create & Cultivate
Ready to Get Ahead?
Whether your audit is next month or next year, the time to start is now.
Schedule a discovery call with Zeroed-In to review your audit readiness and create a customized action plan based on where you are in your audit cycle.