Timeline: Oct to Feb

Window Focus
Oct-Nov PBC planning, inventory dates, tax provision scoping
Dec Soft close, accruals, W-2/1099 data scrub
Early Jan Hard close, 1099/W-2 filing — see Filing Deadlines
Jan-Feb Audit fieldwork, tax return support

Pair with Month-End Close, Bank Rec, Q1 Audit Prep, and SOX 404.

25-Step Checklist

A. Pre-close (Steps 1-6)

  1. Freeze close calendar and PBC owners.
  2. Confirm materiality with auditors — see Audit Procedures.
  3. Schedule inventory observation — see Inventory.
  4. Scrub vendor masters for 1099s and W-9s.
  5. Confirm loan, lease, and equity activity — see ASC 842.
  6. Lock chart changes — see Chart of Accounts.

B. Cut-off and substance (Steps 7-16)

  1. Reconcile all cash; clear >30-day outstanding.
  2. Age AR/AP; reserve and accrue GRNI — see AP Fraud.
  3. Tie payroll clearing to returns — see Payroll and Multi-State.
  4. Test revenue cut-off to ASC 606.
  5. Roll prepaids, fixed assets, leases.
  6. Post tax provision with Year-End Tax Planning inputs.
  7. Review related parties and subsequent events to report date.
  8. Run flux vs prior year and budget with owner commentary.
  9. Controller + CFO review and lock.
  10. Export GL + audit logs — see QuickBooks vs Xero.

C. Filing and PBC (Steps 17-25)

  1. File 1099/W-2 and state equivalents.
  2. Reconcile filings to GL (no plugs).
  3. Assemble PBC binder: recs, agings, contracts, minutes.
  4. Provide Internal Controls walkthroughs.
  5. Track auditor requests in one log; no email-only support.
  6. Clear management review notes with retest where needed.
  7. Minute subsequent events through report date.
  8. Archive binder immutable 7 years.
  9. Post-mortem: adjustments root cause and control fix.

Worked Example: The $90k Cut-Off Error

December 31: warehouse ships $90k of product at 11pm; invoice dated January 2 (next batch run). Books show January revenue; inventory still shows the goods on hand. Both wrong. Fix: accrue December shipment (debit AR, credit revenue per ASC 606 transfer of control), relieve inventory, and reconcile the shipping log to the invoice register for the last 5 shipments and first 5 of January — with BOL dates, not invoice dates, as truth. Then fix the root cause: invoices must generate from shipment, not from batch schedule. One cut-off error of this size moves EBITDA covenants — see Debt — and, uncaught, becomes a prior-period restatement next year.

Soft Close vs Hard Close (Run Both)

  Soft close (Dec 31 + 2 days) Hard close (mid-January)
Purpose Flash P&L for management, freeze estimates Audited numbers, filed returns support
Accruals High-level, prior-month run-rates Invoice-level, evidenced
1099/W-2 inputs Preliminary scrub Locked, reconciled — see Filing Deadlines
What it prevents January surprises Audit adjustments

Teams that skip soft close discover the $90k problem in February, when fixing it means restating January management reports and re-explaining results to the board. The soft close costs two days; the alternative costs credibility.

Tax Provision Tie-Out (Controller’s Hardest Page)

Book item Tax treatment Bridge
Depreciation $400k book $650k MACRS + bonus $250k add-back to deferred — see Fixed Assets
174 R&D $600k expensed Capitalize, amortize ~$60k $540k add-back — see Year-End Tax Planning
Meals $40k 50% limit $20k add-back — see Business Meals
State NOLs Varies by state Valuation allowance analysis per jurisdiction

The provision memo is the document the tax partner and the auditor both read first. Reconcile effective rate to statutory with every bridge item labeled; unexplained rate swings draw questions from both sides. File with the return workpapers and retain per Record Retention.

KPIs to Report

  • Days to hard close, PBC timeliness, adjustment count, repeat findings.
  • Report to Audit Committee.

FAQ

What causes most delays?

Late AP, payroll tie-out gaps, and missing revenue support. Fix owners in October.

Should tax and audit share a binder?

Yes, single source with tax provision separate — avoids version drift.

Next Steps

  1. Freeze PBC calendar this week.
  2. Scrub 1099/W-9s in November.
  3. Lock hard close date and hold it.