newsletter
iLeasePro Newsletter

Get our latest breaking news delivered to your inbox

Demystifying Lease Accounting Audits: A Comprehensive Checklist



Schedule a Demo
  • iLeasePro Lease Portfolio Management

    Navigating the intricacies of lease management can often feel like threading a needle in a haystack. Amidst the myriad of terms, conditions, and financial intricacies, ensuring that every detail aligns with your lease agreement is paramount. But where does one begin?

    Enter the Lease Audit Checklist - your compass in the vast landscape of lease auditing.

    In this blog, we'll unravel the essential components of a thorough lease audit, providing you with a step-by-step guide to ensure accuracy, compliance, and peace of mind. Whether you're new to the realm of lease management or seeking to refine your auditing process, this checklist is tailored to be your essential companion. Join us as we break down the art and science of lease auditing, one checklist item at a time. Here's a comprehensive checklist to guide you through the lease accounting audit process:

  • iLeasePro Lease Management Solution

    1. Lease Identification & Inventory

    • Lease Documentation: Ensure all lease agreements, amendments, and related documents are available
    • Lease Inventory: Maintain a master list of all current leases, including their start and end dates.
    • Embedded Leases: Identify and list any leases embedded within other contracts or agreements.

  • iLeasePro Lease Portfolio Management

    2. Financial Terms & Calculations

    • Base Rent: Confirm the base rent amounts against the lease agreement.
    • Rent Escalations: Verify any scheduled rent increases and ensure they've been applied correctly.
    • Additional Charges: Check for any additional charges such as maintenance, utilities, or common area expenses.
    • Security Deposits: Confirm the amount and terms of any security deposits held.
    • Lease Incentives: Identify any rent abatements, fit-out contributions, or other incentives and confirm they've been accounted for correctly.

  • iLeasepro ASC 842 Classification

    3. Lease Classification

    • Classification Criteria: Determine if the lease is an operating or finance lease based on ASC 842 criteria.
    • Documentation: Maintain documentation justifying the lease classification.

  • iLeasePro Automated Journal Entries

    4. Right-of-Use (ROU) Assets & Liabilities

    • Initial Recognition: Ensure ROU assets and lease liabilities are initially recognized at the lease commencement date.
    • Subsequent Measurement: Review calculations for any adjustments to ROU assets and liabilities due to lease modifications or other factors.
    • Impairment: Check if there's any impairment of ROU assets and ensure it's properly accounted for.

  • iLeasePro Lease Rent Calculations

    5. Lease Term & Options

    • Lease Term: Confirm the lease term against the lease agreement.
    • Renewal Options: Document any options to renew the lease and whether they're likely to be exercised.
    • Termination Options: Note any options to terminate the lease early and the associated penalties or costs.

  • iLeasePro Financial Disclosure Footnotes

    6. Financial Disclosures

    • Qualitative Disclosures: Ensure there's adequate description of the leasing arrangements, including the nature of assets and any restrictions or covenants.
    • Quantitative Disclosures: Confirm that financial information, such as future lease payments and weighted-average lease term, is disclosed.

  • iLeasePro Real Estate Equipment Lease Accounting

    7. Subleases & Sale-Leaseback Transactions

    • Sublease Identification: Document any subleases and their respective terms.
    • Sale-Leaseback: Identify any sale-leaseback transactions and ensure they've been accounted for correctly.

  • iLeasePro Minimizing Lease Errors and Risks

    8. Lease Modifications & Reassessments

    • Modification Documentation: Document any changes to the original lease terms.
    • Reassessments: Reassess lease classification or measurement if there are significant modifications.

  • iLeasePro Lease Reporting

    9. Internal Controls & Processes

    • Data Collection: Confirm processes for collecting and updating lease data.
    • Accuracy Checks: Ensure controls are in place to verify the accuracy of lease data and calculations.
    • Approval Workflow: Check that there's a defined workflow for reviewing and approving lease entries.

  • iLeasePro Lease Management Software

    10. Lease Management Software (If Applicable)

    • Software Compliance: Ensure that any lease management software used is compliant with ASC 842 requirements.
    • Data Integrity: Check that the software maintains an accurate and up-to-date lease database.
    • Audit Trail: Confirm the software provides a clear audit trail of all lease transactions and modifications.
    • SOC 1: Confirm the software has been certified with a SOC 1 certification.

  • iLeasePro Document Management

    11. Other Considerations

    • Force Majeure Clauses: Review any force majeure clauses and their implications.
    • Insurance Requirements: Confirm compliance with any insurance requirements stipulated in the lease.
    • Maintenance & Repair Obligations: Review and confirm who is responsible for maintenance and repairs.

  • iLeasePro Lease Portfolio

    Let iLeasePro Help You in Your Auditing Journey

    By methodically working through this checklist, you'll ensure a thorough and accurate lease audit, keeping your organization compliant and transparent in its leasing activities.

    At iLeasePro, we’ve been helping companies understand and implement ASC 842 since it replaced ASC 840 in December of 2021. We know standard inside out, and we know that iLeasePro will help you be in compliance and pass your audit.

    We’ve done this for both small and large businesses, and we’ve also helped these companies use ASC 842 as a business tool to operate more efficiently, get better reporting and use their leases as assets. When you call us we can set you up with a lease accounting software free demo so you can see how it all works.

    To do this, call us at 888-351-4606, or you can email us at info@ileasepro.com We also have plenty of great information about lease accounting software on our website, which is ileasepro.com, and you can chat with a live representative there as well.

Let iLeasePro Simplify Your Lease Accounting

Schedule a Demo

Related: Free Trial, Express Subscription, ASC 842 Financial Reporting, ASC 842 Balance Sheet Reporting, ASC 842 Income Statement Reporting, ASC 842 Cash Flow Reporting, ASC 842 Statement of Shareholder Equity, ASC 842 Disclosure Notes, ASC 842 Management Discussion, ASC 842 Comprehensive Income, ASC 842 Glossary of Terms, ASC 842 Journal Entries, ASC 842 Software, When Is the ASC 842 Compliance Date, FASB Lease Accounting Software, Understanding the New FASB ASC 842 Lease Accounting Standard, How Does a Lease Balance Sheet Change After the New Standard?, Tracking Lease Details After ASC 842, Deferred Rent Explained Under the ASC 842, Guide to Lease Classification, Overview of Relevant Borrowing Rate, ASC 842 Footnote Disclosure, Lease Accounting, What Does Lease Accounting Software Do?, Key Features of A Lease Accounting Software, How to Never Miss Important Lease Dates, Scaling Your Lease Accounting Software to Your Business Needs, How to Select the Right Lease Solution, How to Set Up Lease Accounting Software, What is the Best Lease Accounting Software?, Overview of the Types of Leases, Equipment Lease Software, How the Right Lease Management Software Makes Equipment Leases Easier, Lease Tracking Software, How The Right Software Can Help You Manage Lease Data, Five Benefits of a SaaS Lease Management Solution, A Centralized Lease Portfolio Making Asset Management Easier, Lease Analysis 101, Lease Analysis: The Financial Metrics, Lease Abstraction, The Importance of Lease Abstraction for Lessees, The Lease Data an Abstract Should Include, What Software Do I Need for Lease Abstracting?, Navigating The ASC 842 Accounting Audit, Essential Guide To Engaging Auditors, Leveraging AI for Enhanced Year-End Audits