Yellow Book Audit Preparation Checklist

June 3, 2024

Yellow Book Audit Preparation Checklist

Are you getting ready for an upcoming external audit? Check out the following guide to documentation you need to prepare ahead of time for your financial audit. We’ve also included a printable version of the checklist to help you keep track of the documents you need. Read on to find out more. 

What Is a Yellow Book Audit?

Previously in the Honest Buck audit series, we covered some basics about Yellow Book audits, including what they are, why they are important, and what to expect during a Yellow Book audit: 

What Is a Yellow Book Audit? 

What to Expect During a Financial Audit

What Documents Do I Need to Prepare for a Yellow Book Audit? 

Preparing all the documentation needed for the audit ahead of time is absolutely key. 

Let’s take a look at the financial documents you need to have ready:

  • Financial statements, including income statement, balance sheet, statement of cash flows, and statement of changes in equity for for-profit companies
  • Financial statements, including statement of financial position, statement of activities, statement of functional expenses, and statement of cash flows for nonprofit organizations
  • General ledger
  • Fiscal year budget
  • Revenue and sales data
  • Expense approvals
  • Accrual accounts
  • Year-end trial balance 
  • Year-end payroll tax reports, Forms W-2, W-3, and 1099’s issued during the calendar year
  • Year-end report from outside payroll service for either the fiscal year or calendar year
  • Schedule of Federal Awards with federal awarding agency, pass through agency, grant number, program name, CFDA number, award amount, current year expenses, and prior year expenses
  • Grant agreements for those grants expired or expiring
  • List of all members of the Board of Directors for the fiscal year
  • List of all members of the Audit Committee, if applicable, or oversight board for the audit
  • Minutes of meetings of the Board of Directors and Committees
  • Personnel manual 
  • Accounting Policies and Procedures manual
  • Lease agreements
  • Detailed records of donations of goods and services, including the number of hours for donated services
  • Detailed records of legal fees paid, including the name and address of all attorneys used throughout the year
  • Detailed records of repairs and maintenance account
  • All paid bills, bank statements, and grant reports for the year
  • Year-end bank reconciliation and bank statements 
    • Bank reconciliation should have a complete list of outstanding checks with check number, date, and amount
    • Bank reconciliation should also have a complete list of deposits in transit 
  • Year-end investment summary with year-to-date transactions and balance of investments held at year-end at fair market value (FMV) and original cost
  • Detailed records of donations of marketable securities
  • List of grant funds received and receivable, including grant award numbers and funding sources
  • Fixed asset and depreciation schedule, including copies of any documentation related to donated fixed assets
  • Reconciliation to support any other asset accounts 
  • Reconciliation of deferred grant revenue and refundable advances
  • Reconciliation of net assets classifications 
  • Records of year-end accounts payable and accrued expenses such as payroll tax payable and accrued compensated absences
  • Schedule of changes in notes payable and copies of the notes

You can download a printable version of the checklist here to help you prepare these items for your upcoming audit. 

How Do I Organize the Documents I Need for the Audit? 

In addition to gathering all of the above-mentioned documentation ahead of the audit, organizing these documents will help ensure that the auditors can review and verify the company’s financial records completely and correctly. 

Here are a few best practices to keep in mind when it comes to organizing documents for your upcoming audit:

  • Get your books up-to-date. You want to be sure the auditors are looking at your most up-to-date financials, so you need to get caught up on your bookkeeping before the process begins. You can read our tips for getting caught up on your books here
  • Comply with requests from the audit team. Your auditors may have specific requests when it comes to the documents they need to review. Be sure to adhere to requirements, including deadlines and document formats, to keep things running smoothly. 
  • Use accounting software to stay organized. You can digitally organize audit-related documents with many accounting software programs. Having a digital hub for all the required information your audit team will need to review can be extremely helpful for everyone involved. 

If you follow these strategies for preparing documentation ahead of your audit, then you can reduce stress and hassle for both your staff and your audit team before, during, and after the audit. 

Ready to get started with your Yellow Book audit? The experts at Honest Buck can help. We specialize in external audits for preschools and childcare companies.

Contact us today

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