Streamlining Audits with PBC Checklists: What You Need to Know

If you are approaching an annual audit or if you’ve had an annual audit, you’ve likely encountered the term “PBC.” But what exactly does it entail?

To truly grasp the significance of an audit, it’s essential to redefine its purpose. Many organizations perceive audits solely as a means to generate financial statements. It’s not uncommon for these statements to be colloquially referred to as the auditor’s financials, when in fact, it’s management’s responsibility to produce them. Auditors serve as a critical checkpoint, ensuring that the issued numbers comply with accounting principles and are accurately portrayed. To provide this assurance, auditors conduct tests on financial data.

However, auditors require a starting point. They lack the day-to-day insight into organizational operations and significant events throughout the year. Moreover, they don’t have direct access to accounting files and supporting documentation. Thus, they rely on management to furnish the necessary information for the audit. This is where the PBC (Prepared by Client) audit checklist comes into play.

What exactly is a PBC Checklist?

A PBC checklist compiles all documentation, spreadsheets, and schedules that your auditing firm anticipates your organization to provide during the annual audit. Ideally, your auditors should furnish this checklist several months before the audit commences. If not provided, it’s prudent to request one. While these lists typically remain consistent from year to year, it’s advisable to acquire a new checklist annually to avoid any surprises. Changes in audit standards or personnel may lead to modifications in the PBC.

Typical items on a PBC checklist include the Trial Balance, financial statements, supporting schedules, 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. Additionally, other documentation such as bylaws, organization charts, grant copies, lease agreements, operational contracts, board meeting minutes, fixed asset disposals, and loan documentation may be required. Auditors might also inspect random personnel files to ensure compliance.

Key Considerations for Your PBC Checklist:

Ensure clarity: It’s crucial that the PBC checklist is understandable, enabling effective collaboration between auditors and management.

Regular updates: The checklist should be revised annually to accommodate changes within the organization and evolving accounting regulations.

Timely provision: Certain items, like the Trial Balance and interim financial statements, are typically required before the audit begins. Ideally, all other listed items should be furnished by the first day of fieldwork.

How do PBC lists aid the process?

PBC lists serve as a roadmap, offering auditors a structured starting point. They facilitate efficient audit processes by organizing and managing pre-audit tasks. By addressing requests throughout the year, financial teams ensure readiness, enabling prompt responses during the audit itself.

Seeking Audit Support?

If your accounting team finds itself overwhelmed with day-to-day tasks, enlisting the expertise of experienced professionals can streamline the audit process. Chazin & Company can assist in developing a year-round approach to ensure a seamless audit, freeing up internal resources to focus on core responsibilities.

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Chazin & Company

With over 19 years working exclusively with nonprofits, we pride ourselves in having a unique understanding of nonprofit accounting needs. We believe that nonprofits deserve personalized, quality service and should not settle for a one-size-fits-all approach. We collaborate with you to provide a fully virtual and customized solution that is not only cost-effective but also strengthens your accounting function. We offer a team of industry experts at your disposal to provide advice, leading technology, and to supplement existing staff to improve efficiency and compliance.

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