The PBC Audit Checklist—and Why You Need One

If you’re getting close to an annual audit, you’ve probably heard the term “PBC”—but what is it and what does it mean? 

First, it is important to understand what an audit REALLY is.  So many organizations view an audit as an opportunity to issue financial statements.  It’s not uncommon to even refer to the audited financials as the auditor’s financials when, actually, it is the responsibility of management to own and produce financial statements.  Auditors are simply a second set of eyes who ensure the numbers being issued comply with accounting principles and are fairly stated.  To provide this “assurance” they perform tests on the financial data. 

Auditors, however, need a place to start.  They’re not in the organization day in and day out.  They don’t know the operations or the significant events that have occurred during the yearnor do they have access to your accounting file and supporting documentation.  They need you, the organization’s management, to provide thewith the information required to perform the audit.  This information is requested through the PBC (Prepared by Client) audit checklist. 

What is a PBC Checklist? 

A PBC checklist is a list of all documentation, spreadsheets, and schedules that your auditing firm expects your organization to provide as part of your annual audit.  Your auditors should provide the checklist at least a few months prior to the start of the annual audit.  If they don’t, ask for one!  Although the lists typically don’t change drastically from year to year, it’s always a good idea to ask for one each year to avoid surprises.  If there is a change in audit standards, or even audit firms or partners, this could result in PBC modifications.   

Common items found on PBC lists include a Trial Balance, financial statements, supporting schedules and/or reconciliations for all Statement of Financial Position accounts, net asset roll forward, 941 reconciliation, CRM reconciliation, General Ledger detail, Cash Disbursements Journal, Cash Receipts Journal, and a Statement of Functional Expenses.  You’ll also likely need to provide other documentation such as your bylaws, organization charts, copies of grants, copies of lease agreements and other operational contracts, board meeting minutes, fixed asset disposals, and loan documentation.  The auditors may ask to look at random personnel files to ensure those are in order as well. 

In general, make sure that your PBC checklist: 

  • Makes sense—it won’t do you any good if you don’t understand what the auditors want, so don’t hesitate to ask questions. 
  • Is updated annually to account for changes to your organization and to accounting rules and regulations. 

The auditors will want some items on the list before they start their process.  These are things like the Trial Balance, interim financial statements, board and finance committee minutes and other documents that give them an overview of what’s gone on within the organization during the fiscal year.  Ideally, all other items listed on the PBC list would be provided to the auditors by the first day of fieldwork.  These include bank reconciliations, accounts receivable and accounts payable aging reports, accrual schedules, a fixed asset schedule that includes depreciation expense and a schedule of loans and loan payments, to name a few.

How do PBC lists help?   

They help by providing the auditors with a place to start.  Since the financial statements are yours, they need those along with supporting documentation so they can design tests to prove or disprove their accuracy.   

The better the PBC schedules, the faster the audit.  The PBC checklist helps you organize and manage your pre-audit workload, so your financial team can ensure they have addressed all requests – ideally throughout the year  but certainly before the audit begins. Then, during the audit, your team will be free to respond faster to any requests as they arise.  

Need support for your next audit? 

If your accounting team is swamped with everyday responsibilities and you find yourself falling behind on audit preparations, it might be wise to bring in an experienced expert.  Chazin & Company can help you develop a year-round process that ensures a smooth, uneventful audit—while also allowing your internal team to focus on more mission-critical work.  


First published on May 11, 2020