As year-end approaches, finance teams face a familiar question: Is our ASC 842 audit trail airtight? Auditors expect clear, well-documented evidence—source contracts, key judgments, controls, and change history—that ties directly to the financial statements. In this post, we’ll cover what auditors typically look for, common pitfalls that trip teams up, and how the right technology can make audit season faster and less stressful.
What Auditors Expect to See
- Complete lease population: Proof that all leases and embedded arrangements have been identified and included.
- Source documentation: Executed contracts, amendments, renewal notices, and related support.
- Key judgments and policies: IBR methodology, practical expedients, and classification rationale.
- Measurement support: Inputs used to calculate the ROU asset and lease liability.
- Change control: Logs showing modifications, reassessments, and approval trails.
- Roll-forwards and tie-outs: Reconciliations between subledger balances, GL, and disclosures.
- Access controls: Role-based permissions and audit logs for accountability.
Your ASC 842 Audit Readiness Checklist
- Prove completeness of lease data. Cross-check vendor and asset listings to confirm all leases are captured.
- Centralize documentation. Attach executed agreements and amendments to each lease record for instant access.
- Document judgments and assumptions. Maintain memos for IBR methodology, classification, and option assessments.
- Maintain transparent measurements. Retain payment schedules, CPI evidence, and calculation details for ROU assets and liabilities.
- Track modifications and remeasurements. Keep versioned snapshots showing the impact of every change.
- Generate reconciliations and disclosures. Tie lease subledger data directly to the general ledger.
- Demonstrate controls. Document review workflows, access logs, and segregation of duties.
Common Pitfalls (and How to Avoid Them)
- Missed embedded leases: Review service contracts for dedicated-use assets. See Identifying Embedded Leases.
- Inconsistent discount rates: Apply a standardized IBR policy. Read How to Calculate the Incremental Borrowing Rate.
- Unrecorded modifications: Automate renewal tracking and reassessment alerts. Learn more about Lease Modifications & Remeasurement.
- Spreadsheet errors: Replace manual models with automated, audit-logged subledgers.
How Automation Simplifies ASC 842 Audits
Modern lease accounting software helps finance teams work smarter during audit season by:
- Centralizing contracts and calculations into one system of record.
- Automating disclosures and roll-forwards that align with GL balances.
- Capturing full change history with user stamps and timestamps.
- Supporting controls with approvals, segregation of duties, and role-based access.
Bottom Line
Building a reliable audit trail under ASC 842 takes planning—but it doesn’t have to be painful. By standardizing documentation, automating measurements, and maintaining clear change history, companies can reduce risk, speed up audits, and improve transparency.
Ready to simplify your next ASC 842 audit? Discover how iLeasePro helps organizations prepare audit-ready evidence with accuracy and confidence. Schedule a demo of iLeasePro Today!
