Preparing for an ASC 842 audit begins long before the auditors arrive. The quality of your lease data determines how efficiently the audit process moves, how confidently questions can be answered, and how much time your team spends searching for supporting documentation.
Organizations often focus on lease accounting software when preparing for compliance. Equally important is the quality, consistency, and completeness of the lease information that supports it. Well-organized lease data makes audits smoother; disorganized lease data makes them significantly more difficult.
Every audit begins with knowing exactly what leases exist. This sounds straightforward, but many organizations discover leases stored across multiple departments, shared drives, local offices, or legacy systems.
Begin by confirming that every active lease, amendment, renewal, termination, and related document has been identified. An incomplete lease inventory creates unnecessary risk before the audit process even begins.
Lease abstracts often serve as the operational summary for accounting and reporting. Before relying on those summaries, verify that key information accurately reflects the executed lease documents. Review items such as:
- Lease commencement and expiration dates
- Renewal options
- Rent schedules
- Tenant improvement allowances
- Escalation provisions
- Responsibility for operating expenses
- Critical dates
Many leases evolve over time. Amendments may modify rent, extend terms, change premises, or alter financial obligations. One of the most common issues during audit preparation is discovering that amendments exist but were never incorporated into the operational lease record.
Review every executed amendment to ensure the current lease data reflects the complete agreement, not simply the original lease.
Lease information often exists in more than one place — accounting systems, lease administration platforms, shared drives, spreadsheets. The audit process becomes much easier when these systems reflect consistent information.
Reconciling key lease data before the audit helps eliminate unnecessary questions and reduces time spent resolving discrepancies.
Auditors frequently request documentation beyond the lease itself. Having supporting materials readily available improves efficiency for both internal teams and auditors. This may include:
- Executed lease agreements
- Amendments
- Assignment documents
- Landlord correspondence related to lease modifications
- Payment schedules
- Prior audit documentation
Well-organized records reduce time spent locating information during the audit.
ASC 842 compliance doesn't end once financial calculations are complete. Lease events continue throughout the year — renewals, terminations, modifications, new locations. Reviewing upcoming critical dates ensures that future lease changes are identified promptly and incorporated into lease accounting processes as they occur.
Preparing Beyond the Audit
Organizations often view audit preparation as a one-time project. In reality, the strongest lease administration programs maintain audit-ready data throughout the year. Consistent lease abstraction, accurate documentation, standardized processes, and ongoing data maintenance reduce the effort required during every future audit cycle.
Rather than preparing for an audit every year, the organization stays prepared.
The Bottom Line
Successful ASC 842 audits depend on more than accounting software — they depend on accurate lease data. Organizations that invest in clean, complete, and well-maintained lease information spend less time resolving discrepancies, respond more confidently to audit requests, and create stronger operational visibility across the portfolio.