- 1Confirm the type of audit. Financial statement audit, tax audit, SOC examination, or due-diligence review. Each has different scope.
- 2Designate a single point of contact. Usually the CFO or controller. The auditor should not be calling random team members.
- 3Pull supporting documentation systematically. Bank statements, contracts, board approvals, AR / AP detail, expense substantiation.
- 4Reconcile any inconsistencies before the auditor sees them. Surprises during fieldwork extend the timeline and erode trust.
- 5Prepare the trial balance and roll-forward schedules. By major balance sheet account.
- 6Draft the management representation letter early. Auditors will request it; preparing it forces useful discipline.
- 7Schedule weekly check-ins during fieldwork. Flag issues immediately rather than at the end.
- 8Document the resolution of each finding. For next year's audit and for internal control purposes.
When startups need audits
Most early-stage companies are not required to be audited. The requirement usually comes from external forces: investors requiring audits past Series B, banks requiring audits for credit facilities, potential acquirers requiring audits for diligence, or state requirements in specific industries.
When no external party requires an audit, the startup usually does not need one. Reviewed financials (a lighter form of external validation) or just internally-prepared financials work for most purposes. Voluntary audits are expensive ($30K-$100K+) and produce limited business value unless something forces them.
The shift from not-audited to audited is significant. Once you have an audit, the bar for books quality is higher. You cannot go back to casual bookkeeping. Plan for this shift as a permanent increase in financial operating discipline.
Preparing before the audit
Clean books are the foundation. Every account reconciled through the audit period. Revenue recognition policies documented and applied consistently. Expense classifications stable over time. Fixed assets tracked with supporting documentation. Any shortcuts in these areas will produce audit findings.
Accounting policies written down. Revenue recognition, deferred revenue treatment, depreciation methods, inventory valuation, stock option accounting, intercompany pricing. Auditors need to see these written. Verbal explanations do not suffice.
Supporting documentation ready. Bank statements for the full period, bank reconciliations, major contracts, employment agreements, fixed asset invoices, equity grant documentation. Anything the auditor will test, have available.
Working with the auditor
First audits take longer than subsequent ones. Expect 3-4 months from kickoff to signed opinion. Subsequent annual audits run 6-10 weeks. The first audit also involves more questions because the auditor is building their understanding of your business and systems.
Be responsive. The single biggest factor in audit timeline is how quickly you respond to auditor requests. A company that takes 5-day turnarounds on document requests gets audited slower than one with 1-day turnarounds. Clear out time on your calendar during the audit.
Prepare for findings. Even clean audits produce recommendations. Common ones: segregation of duties improvements, documentation enhancements, IT controls, and process refinements. Treat these as useful external input rather than criticism. Implementing recommendations strengthens the finance function.
What it costs and what you get
Audit fees typically run $30K-$75K for Series A/B stage companies, $75K-$150K for Series C and beyond, and higher for complex or multi-entity companies. Regional firms are cheaper than Big 4 but produce similar-quality opinions for most private companies.
What you get: an independent opinion that your financial statements fairly present your financial position. This opinion is what investors, banks, and acquirers rely on. Without it, each party has to do their own diligence, which is slower and more expensive overall.
Secondary benefits: a more disciplined finance operation, documented accounting policies, clearer internal controls, and institutional memory that survives team turnover. These benefits often justify the audit cost even when not strictly required.