Glossary · Audit and reporting
Audit readiness
The state of having books, estimates, memos, and documents that let a first audit finish on time and on budget.
A first audit is the moment the books are examined by someone with no reason to be generous. Audit readiness means the monthly close is complete and reconciled, the significant estimates such as clinical accruals and stock compensation are supported by models, every complex instrument and agreement has a written accounting memo, and the supporting documents can be produced on request.
The audit fee is driven by hours, and the hours are driven by how long the team waits and how many adjustments it proposes. Companies that prepare finish a first audit in eight to twelve weeks; companies that do not can take six months, restate opening balances, and carry a management letter full of findings into their next financing.
The work is sequenced: accrual GAAP and a monthly close first, then the R&D estimates, then equity and revenue memos, then the document set. Starting during the year being audited is far cheaper than starting after it ends.
General explanation, not accounting, tax, or legal advice for any specific company. Standards and tax law change; the entry reflects my understanding as of September 2026.