Cooking Up A Smooth Interim Audit

September 15, 2025

It is hard to believe, but audit planning is in full swing, soon to be followed by interim audit procedures performed in Quarter 4. Interim audit procedures, conducted partway through the fiscal year, provide auditors with a snapshot of your business’s financial health and internal practices and also allow for more of the audit to be completed before “busy season.” By proactively preparing for these procedures, restaurant operators can minimize disruptions, address potential issues early, and lay the foundation for a smooth year-end audit.

The following bulleted guide outlines the critical steps and best practices for navigating interim audit requirements with confidence.

Scheduling An Audit Planning Meeting

Arrange a formal audit planning meeting with your external auditors, key accounting personnel, and relevant operational managers.
Prepare an internal memo or discussion notes that cover:
- Year-to-date financial activity highlights, including unusual transactions and significant events (e.g., new locations, changes in ownership, closures, legal matters, major new suppliers, new contractual agreements).
- Known accounting issues or estimates affecting interim results, such as lease accounting changes, deferred comp programs, or a loyalty program implementation.
- Updates on new accounting standards relevant to the restaurant industry.
- Discussion of documentation readiness and areas requiring further clarification.
- Overall debt covenant compliance, or whether a waiver will be needed.
Discuss auditor requests for supporting schedules and explanations. Proactively identify areas where additional documentation or analysis may be needed.
Use this meeting to clarify timelines, deliverables, and communication protocols, ensuring alignment between your team and the auditors for the interim period.

Document Organization

Ensure all relevant financial documents are systematically organized and easily accessible. These typically include revenue reports, accounts payable/receivable ledgers, payroll records, inventory counts, fixed asset registers and depreciation schedules, bank statements, and expense or capex invoices.
Gather all new contracts and agreements to provide to the audit team (including debt agreements, lease agreements, operating agreements, franchise agreements, supplier agreements, etc.)
If you have not already, begin to adopt a digital document management system to streamline retention and retrieval. Cloud-based platforms increase efficiency and minimize the risk of missing or duplicated documents.
Establish a consistent process for saving, updating, and archiving supporting documents throughout the fiscal period to avoid last-minute scrambling.
Prepare a checklist of required documents—pair each with its responsible staff member to promote accountability and completeness.

Reconciling Balance Sheet Accounts

Complete reconciliations for all balance sheet accounts before the interim audit. Focus on high-risk areas for restaurants, such as cash, accounts receivable, fixed assets, accounts payable, accrued liabilities, leases, and debt. This is the number one reason for audit delays and overruns.
Roll forward your equity balance from the prior year to capture all equity activities such as contributions, distributions, treasury share repurchases, and share-based compensation.
Ensure that bank reconciliations are up-to-date, with outstanding checks and deposits properly documented and cleared. There should be no unexplained variances.
Reconcile the fixed asset sub-ledger to the general ledger ensuring all capital expenditures have been captured and given a proper useful life based on your basis of accounting used (tax vs. GAAP). Perform a roll forward from the prior year to the current year, ensuring you capture all additions and disposals.
Reconcile accrued liabilities to ensure proper accrual of wages, tips, and related taxes. If self-insured, now is a great time to revisit your incurred but not reported claims to be accrued.
Review accounts payable and receivable for old or disputed items. Document resolutions or proposed adjustments for any anomalies discovered.
Ensure all new leases and amended leases have been properly updated in your lease accounting software or properly accounted for in your lease accounting calculations. Key reminder to ensure your opening balances agree to your prior year balances as well as your ending balances to ensure changes and updates are not impacting prior year.
Retain clear documentation for each reconciliation, including supporting schedules and explanations for variances, as these will be critical during the audit review.

Focus on Technical GAAP Matters

Impairment of fixed assets, ROU assets, and goodwill – interim is a great time to audit these areas and identify if issues exist or more is needed at year-end procedures.
Going concern – if there are known liquidity and cash flow issues, take the time during the interim to discuss the issue with your auditors, along with management’s plan to address the issue. Getting ahead of the issue will prevent any report issuance delays.
Lease accounting – there are always accounting issues with lease accounting related to tenant improvement allowance treatment, modifications, or terminations. Take the time now to address the proper accounting or ask for assistance.

Addressing Segregation Of Duty Issues

Review the flow of transactions and access to sensitive financial processes to identify potential segregation of duty concerns. In all companies, the most common material weakness relates to the top financial person having full access to the general ledger without further mitigating controls to review what the top financial person is performing within the system.
Document or update internal controls to prevent or detect unauthorized or erroneous transactions. Examples include manager review, dual signatures for payments, and inventory cycle counts.
Evaluate areas where limited staff may force consolidation of roles. If full segregation is not feasible, implement compensating controls such as increased oversight, regular reconciliations, and independent reviews.
Prepare written explanations for any segregation of duty challenges and describe the mitigating controls to present to auditors. This demonstrates awareness and proactive risk management.
Recognize that unaddressed segregation of duty issues can lead to material weaknesses or significant deficiencies. Early identification and remediation are key to a successful audit outcome.

Approaching interim audit procedures with organized documentation, reconciled accounts, planned communication, and strong internal controls will minimize surprises and promote efficiency.

By focusing on these critical areas, restaurant operators lay the groundwork for a thorough and effective financial statement audit, reducing risks and contributing to business integrity, along with time savings and fewer interruptions for your team.

If you have any questions or need help getting your records in order, reach out to your GBQ advisor.

By Kari Maue, CPA, Director, Assurance & Advisory