When Your Startup Needs Its First Audit (And How to Prepare)

Nobody gets excited about audits. But for growing companies, your first audit is often a requirement — triggered by a fundraise, a large contract, or hitting a revenue threshold. Preparing proactively saves you months of pain and tens of thousands in audit fees.

When an Audit Becomes Necessary

• Series B and beyond: Most institutional investors require audited financials
• Revenue thresholds: Some states require audits above certain revenue levels
• Large contracts: Government contracts and enterprise customers often require audited statements
• Debt covenants: Bank loans frequently include audit requirements

6-Month Preparation Timeline

Month 1-2: Select an audit firm. Get referrals from your investors or industry peers. Understand their timeline, fees, and requirements. The Big Four are unnecessary for most companies under $50M — regional firms offer quality work at 40-60% of the cost.

Month 3-4: Conduct a pre-audit readiness assessment. Review your accounting policies, internal controls, and documentation. Fix issues before the auditors arrive — remediation during an audit is expensive and stressful.

Month 5-6: Prepare your audit package: trial balance, detailed support schedules for every balance sheet account, revenue backup, significant contracts, board minutes, and equity documentation.

Reducing Audit Fees

Audit fees are largely driven by auditor effort. The better prepared you are, the less time they spend — and the less you pay. Companies with clean books and organized documentation typically pay 20-30% less in audit fees than those requiring significant auditor cleanup.

Do This Monday

1. Determine when you’ll need your first audit. Count back 6 months. That’s when preparation should start.
2. Ensure your books are clean through last month. Auditors base their assessment on how well-maintained your ongoing records are.
3. Start collecting board minutes, significant contracts, and equity documentation in one place. You’ll need all of it.

If you want help preparing for your first audit, book a free consultation →