Contains verified lead schedule reference map (A–EQ with supporting codes), SSARS engagement level decision tree (AR-C 70/80/90 independence gates), and AJE/RJE posting patterns with workpaper cross-references. PBC lists, tickmark conventions, workpaper packaging, management representation letters, compilation vs review. Consult when "building the PBC list for the year-end audit" or preparing lead schedules, posting auditor adjustments, choosing compilation vs review, or assembling workpaper packages.
Contains verified lead schedule reference map (A–EQ with supporting codes), SSARS engagement level decision tree (AR-C 70/80/90 independence gates), and AJE/RJE posting patterns with workpaper cross-references. PBC lists, tickmark conventions, workpaper packaging, management representation letters, compilation vs review. Consult when "building the PBC list for the year-end audit" or preparing lead schedules, posting auditor adjustments, choosing compilation vs review, or assembling workpaper packages.
Audit Support
Operational skill for preparing books and deliverables for external audit, compilation, and
review engagements. Covers the bookkeeper's responsibilities — not the auditor's. The
bookkeeper assembles supporting schedules, posts adjustments, generates PBC lists, and ensures
books are audit-ready before the external team arrives.
Prerequisites
Books must be through monthly close before audit prep begins. Invoke bookkeeping:monthly-close
to confirm close status. All bank reconciliations, subledger reconciliations, and accruals
must be complete for the period under audit.
SSARS Engagement Levels
Three levels of service in ascending assurance order. The engagement level determines what the
bookkeeper must prepare and how financial statements are presented.
Preparation (AR-C 70)
No assurance provided, independence not required
No report required (optional disclaimer: "No assurance is provided on these financial statements")
Bookkeeper assembles financial statements from client-provided information
No verification, corroboration, or analytical procedures required
Appropriate for: internal use, bank loan packages not requiring compilation, tax return support
Compilation (AR-C 80)
No assurance provided, independence not required (must disclose lack if impaired)
Report required — must accompany the financial statements
Accountant reads statements for appropriate form and obvious material misstatement
May omit substantially all disclosures if not done to mislead (disclose in report)
Independence impairment: performing bookkeeping for the client impairs independence; can still compile with disclosure
Review (AR-C 90)
Limited assurance (negative: "not aware of any material modifications")
Independence required — cannot perform if firm does bookkeeping and independence is impaired
Requires inquiry, analytical procedures (horizontal, vertical, ratio, reasonableness), and management representation letter
Management representation letter refusal = withdraw from engagement
Going concern evaluation required (one year from statement date)
Choosing the Level
Preparation when no third-party assurance needed (internal, tax-basis)
Compilation when lender or other party needs CPA-associated statements but not assurance
Review when limited assurance required (lender covenant, investor, owner preference)
If the firm performs bookkeeping, independence is impaired — compilation with disclosure is the ceiling unless a separate independent firm performs the review
Engagement Letters
Required for all three levels. Must be signed before engagement begins.
Each lead schedule contains: prior year balance, current year balance, adjustments (AJEs/RJEs),
per-audit balance (current + adjustments), and links to supporting schedules. The per-audit
column is what appears in the final financial statements.
Best Practices
Cross-reference every supporting schedule to its lead
Date and initial all workpapers (preparer and reviewer)
Use consistent tickmarks from the standard legend (see Tickmark Conventions below)
Include a tickmark legend sheet in every workpaper package.
PBC (Prepared by Client) Lists
PBC lists document every item the client must provide to auditors. Generate early — the PBC
list drives audit preparation timelines.
Standard PBC Categories
General — Trial balance, bank reconciliations, bank statements (full year + subsequent month), GL detail, chart of accounts, board minutes, articles of incorporation, org chart
Cash and Investments — Bank recs, 12 months + January statements, investment statements, brokerage confirmations, outstanding check list, deposit in transit detail
Accounts Receivable — AR aging, subsequent collections, bad debt write-offs with authorization, credit memos, revenue recognition policy, major customer contracts
Fixed Assets — Fixed asset register, additions/disposals detail, depreciation schedule, invoices for major additions (>$5,000), capitalization policy
Track each item through these statuses: pending (not received) → requested (follow-up sent) → received (not yet reviewed) → reviewed (no issues) or issue (follow-up needed). Mark n/a for items not applicable to the engagement.
Adjusting and Reclassifying Journal Entries
Entry Types
AJE (Adjusting Journal Entry) — Affects the books. Changes account balances and financial statement amounts. Posted to the GL.
RJE (Reclassifying Journal Entry) — Presentation only. Moves amounts between accounts for proper classification without changing totals. Does not affect the underlying books.
PJE (Proposed/Passed Journal Entry) — Identified but not posted. Auditor determined the amount is below materiality or management declined to record. Tracked in the summary of unadjusted differences.
Every adjustment must include: reference number (AJE-1, RJE-3), entry type, description,
workpaper reference linking to the lead schedule, preparer/reviewer initials, date prepared,
date posted, and platform JE ID once posted. All entries must balance (total debits = total credits).
Workpaper Package Assembly
A complete audit workpaper package contains:
Trial balance — Current year-end, with prior year comparison
PBC request list — All categories, with status tracking
Lead schedules — One per standard reference (A through PL-E), each showing prior balance, adjustments, and per-audit balance
Supporting schedules — Detail behind each lead (bank recs, aging reports, asset rolls, etc.)
Tickmark legend — Standard legend sheet included in every workbook
Adjustment summary — All AJEs and RJEs with posting status
Platform Execution Notes
For platform-specific trial balance extraction, adjustment posting, and period lock, invoke qbo-integration:qbo-audit.
Review Engagement Analytical Procedures
When supporting a review engagement (AR-C 90), the bookkeeper may need to prepare supporting
analyses for the reviewer's analytical procedures:
Horizontal analysis — Period-over-period comparisons; flag changes exceeding materiality
Vertical analysis — Each line as percentage of base (revenue for P&L, total assets for BS)
Ratio analysis — Liquidity (current, quick), profitability (gross margin, net margin), leverage (debt-to-equity), activity (inventory turnover, DSO)
Reasonableness tests — Independent estimates (headcount x average salary = expected payroll; square footage x rate = expected rent)
The reviewer documents expectations, investigation thresholds, results, and conclusions.
Management Representation Letter
Required for review engagements only (AR-C 90). Obtained at or near the report date.
Key representations: financial statements conform to framework, all transactions recorded,
estimates are reasonable, related party transactions disclosed, subsequent events handled,
no fraud or suspected fraud, no known legal violations, all litigation disclosed, contractual
compliance, information provided is complete and accurate.
If management refuses to sign, the accountant must withdraw from the engagement.
Decision Points
Engagement level selection — See SSARS Engagement Levels above. Independence status is the primary gate between compilation and review.
Framework selection — GAAP, tax basis (IRC), cash basis, modified cash basis, regulatory basis. Tax basis is common for small C-corps needing statements primarily for tax return preparation. Document in the engagement letter.
Omit disclosures — Permitted in compilation only, if not done to mislead. Must disclose in report. Never omit in review.
Change in engagement level — Downgrade from review to compilation: acceptable if change in circumstances or scope misunderstanding, unacceptable if done to avoid disclosing a departure. Compilation report must not reference the original review.
Scope limitation in review — If unable to perform required procedures (e.g., no representation letter, analytical procedures impossible for significant area), consider withdrawal rather than modified report.
Going concern — Review: must evaluate. Compilation: no requirement, but disclose if aware. Preparation: no requirement.
Read these for implementation detail and code patterns beyond what is covered above:
references/audit-aje-patterns.md — Full data structures for AJE/RJE/PJE entries with Python implementations. Read for the AuditAdjustment and AdjustmentLine data models, and complete factory functions for revenue, accrued expense, bad debt, and fixed asset adjustments.
references/audit-lead-schedules.md — Lead schedule generation logic with account-to-lead mapping, workpaper package assembly function, and tickmark legend implementation. Read when building lead schedules programmatically or generating a complete workpaper package.
references/audit-pbc-lists.md — PBC list generation with full category definitions, status tracking model, and Excel export implementation. Read when generating PBC lists for distribution to clients.
references/ssars-compilation-review.md — Comprehensive SSARS guidance covering engagement letters, procedures for all three levels, management representation letter content, report language (compilation and review), modified reports, going concern evaluation, supplementary information, and the full effective date log with SSARS 21–26. Read for engagement letter drafting, report wording, or standards questions.
Cross-Plugin References
Invoke qbo-integration:qbo-audit for QBO-specific audit data extraction, trial balance pulls, and adjustment posting patterns
Invoke accounting-foundation:financial-statements for financial statement presentation requirements and formatting
Invoke accounting-foundation:chart-of-accounts for account structure, numbering conventions, and account classification questions
Invoke bookkeeping:monthly-close for close status verification and prerequisite procedures
Cross-Plugin Consumers
firm-operations:quality-compliance — References this skill for QC standards on compilation/review engagements
tax-prep:form-1120-prep — Uses adjusted trial balance as input for return preparation
