Audit-Ready Record Keeping

What is this page about: What auditors ask for and where each item lives in Light: complete ledger records, change history, attached source documents, reconciliations, and the reports to export for a close or audit file. Read it before your first external audit.

On this page

• Audit requirements overview
• Ledger completeness and accuracy
• Audit trail functionality
• Document supporting evidence
• Inter-company transaction documentation
• Bank reconciliation documentation
• Tax transaction documentation
• Accounting policy documentation
• Spreadsheet-free financial processes
• Month-end close documentation
• Year-end audit preparation
• Multi-jurisdiction compliance documentation
• Retention and archiving
• Audit readiness checklist
• Related articles

Audit readiness is the practice of maintaining financial records in a format that external auditors and tax authorities can review and verify. Light keeps your documentation, audit history, and exportable reports in one place to support that work.

# Audit requirements overview

External auditors review your financial records to provide an independent opinion on the fairness of your financial statements. Tax authorities review records to verify you've complied with tax laws. Audit readiness requires:

• Complete ledger records: All transactions recorded with full supporting detail
• Audit trail: History of who created each record, when, and any modifications
• Source documentation: Original invoices, receipts, and supporting documents
• Consistent policies: Documented accounting policies applied uniformly
• Timely records: Financial records prepared during the reporting period, not afterwards
• Control evidence: Documentation of internal controls and review procedures

The sections below cover where each of these lives in Light.

# Ledger completeness and accuracy

Light records all transactions in the general ledger with complete detail:

• Document origination: AP, AR, JE, FX, CN, CT, BP, YC, DE, CC transactions recorded with full supporting information
• Dual-entry posting: Every transaction posts to at least two accounts (general accounting principle)
• Amounts in multiple currencies: Transaction, local, and group currency amounts preserved
• Account mappings: Clear traceability from transaction to general ledger account
• Balance verification: every posting keeps your ledger balanced, since debits and credits must match before a document posts

Your audit team can access the complete ledger with drill-down capability from summary financial statements to individual transactions. You can grant external auditors read-only access by assigning them the Auditor role.

One exception is worth knowing: the Auditor role can also trigger an Astra run, which is a write action. The role is read-only across your accounting records, rather than read-only without exception.

Good to know: Light maintains a transaction-immutable ledger. Once posted, transactions cannot be deleted (only reversed with an offsetting entry), providing strong audit evidence.

# Audit trail functionality

Light logs all financial activities with full audit trail:

Posted transactions show:

• Who created the transaction (user ID)
• When created (timestamp)
• Original amounts and accounts
• Post date and status

Modified transactions show:

• Original posting details
• Each modification (edit date, user, and the change itself)
• Final current state

Approvals and authorisations show:

• Who approved each transaction
• Date/time of approval
• Evidence of segregation of duties (creator ≠ approver)

Open a document and view its history tab. This is called Activity on journal entries, and Log on invoices, bills, card transactions, credit notes, purchase orders, and FX revaluation documents. A ledger transaction has no tabs of its own, so review history from the document that created it.

Note: field-level before-and-after tracking is live today for vendor bills, credit notes, card transactions, and journal entries, where journal entries cover shared fields. Sales invoices are built for it but not switched on by default, so ask Light if you need it there. The remaining types still use Light's earlier audit log, which can show raw internal codes, has some field-label drift, and may combine several changes made in one transaction into a single entry. Light is extending the newer tracking one document type at a time.

# Document supporting evidence

Attach supporting documents to transactions in Light:

1. Create an AP, AR, or JE document
2. Open the Documents tab
3. Upload original invoices, receipts, contracts, or other supporting documents
4. Light records the file name and file type against each document, and the history tab shows when it was uploaded. The uploader appears as a user ID rather than a name, so note the person if you need that for the audit file

Your audit team can open original documents directly from Light, alongside the transaction they belong to.

# Inter-company transaction documentation

Multi-entity organisations with inter-company transactions require clear documentation:

1. Create inter-company transactions with clear labelling
2. Link the original transaction to its corresponding inter-company mirror entry
3. Document the business purpose and pricing methodology
4. Maintain supporting inter-company agreements

Light reports inter-company transactions separately and provides elimination documentation during consolidation.

# Bank reconciliation documentation

Reconcile bank accounts regularly:

1. Navigate to Accounting → Bank reconciliation
2. Upload your bank statement
3. Match transactions to bank statement lines
4. Light records each match, including who performed the reconciliation and when

Maintain monthly reconciliations. Your audit team will request these.

# Tax transaction documentation

Light maintains specific documentation for tax compliance:

VAT/Sales Tax:

• Tax authority registrations and identification numbers
• Tax returns filed (with filing confirmations)
• Tax payment records
• Exemption certificates
• Tax calculation methodologies documented

Income Tax:

• Tax identification numbers (EINs, company registrations)
• Correspondence with tax authorities
• Tax positions taken and supporting documentation
• Transfer pricing documentation (if applicable)

Navigate to Planning & Reports → Reports to access all tax-related records.

# Accounting policy documentation

Document your accounting policies:

1. Navigate to Settings → Guardrails → Policies

2. Document your policies for each area:

   • Revenue recognition (IFRS 15 vs. ASC 606 compliance)
   • Depreciation methods and useful lives
   • Inventory valuation method
   • Foreign exchange treatment
   • Consolidation and elimination methodologies
   • Deferred tax policies

3. Record effective dates

4. Document any changes and reasons for changes

5. Archive prior-period policies

Provide your auditor with this documentation early in the audit, and apply the same policies across every period.

Tip: Create a formal "Accounting Policies and Procedures Manual" in Light detailing all significant accounting judgments and estimates.

# Spreadsheet-free financial processes

Maintain records in Light rather than spreadsheets:

• Excel variance analysis calculations are hard to audit
• Manual adjustments lack audit trail
• Version control in spreadsheets is unreliable
• Consolidation spreadsheets are prone to formula errors

Use Light's reporting features for all analysis. Export reports to CSV for presentation, but maintain calculations and supporting detail in Light's audit-trail system.

Good to know: Your auditors expect to audit transactional detail in Light, not formulas in spreadsheets.

# Month-end close documentation

Prepare comprehensive month-end documentation:

1. Close out GL accounts for the month
2. Document accruals, prepayments, and deferred revenue
3. Prepare bank reconciliation
4. Calculate and document FX impacts
5. Review and document significant transactions
6. Create a month-end close summary
7. Archive in Light

This documentation provides auditors with clear evidence of your close process and financial controls.

# Year-end audit preparation

As year-end approaches, prepare audit documentation:

1. Complete trial balance: check that all accounts are reconciled. The General Ledger report follows the same account inclusion rules and is available to every company, so it works as your evidence here
2. Account activity: Demonstrate account activity using the General Ledger report, which gives per-account transaction detail for the period (there isn't a dedicated "turnover" report showing first/last transaction dates specifically)
3. Account detail: List all transactions per account for materiality, again via the General Ledger report
4. Consolidation view: Inter-company transactions and eliminations, available via the Consolidated report mode, which gives you Subtotal, Eliminations and Consolidated columns, rather than a standalone "working papers" report
5. Account reconciliations: Match GL to subledgers (AP aging, AR aging, fixed asset register)
6. Review of estimates: Document judgments on accruals, allowances, reserves
7. Subsequent events: Document and disclose events after year-end but before audit

Most of these come from Light's existing reports rather than dedicated year-end schedules, review what each report actually shows before relying on it for a specific audit request.

# Multi-jurisdiction compliance documentation

For multinational organisations:

• Document tax positions taken in each jurisdiction
• Maintain local entity trial balances and balance sheets
• Preserve local regulatory reporting documentation
• Keep evidence of consolidation and elimination procedures
• Archive local statutory audit reports

Light's multi-entity capabilities maintain separate audit trails per entity and consolidated records.

# Retention and archiving

Maintain financial records according to legal requirements:

• US: 7 years (IRS statute of limitations)
• UK: 6 years (HMRC requirement)
• EU: Varies by country but typically 6-10 years

Light keeps your records in place indefinitely, so retention stays under your control. Periodically export and archive historical records in line with your own retention policy.

Good to know: Document your retention policy and ensure IT systems backup data according to your policy. Your auditor will ask about record retention practices.

# Audit readiness checklist

Before your external audit:

• All transactions are recorded in Light with complete detail
• Supporting documents are attached where required
• Month-end and year-end close procedures are documented
• Bank and inter-company reconciliations are complete
• All estimates (allowances, accruals, deferred items) are documented
• Accounting policies are current and applied consistently
• Prior-year audit findings have been addressed
• Management representation letter can be prepared

Work through this list before your auditor arrives, since each item is something they are likely to ask for.

# Related articles

• Tax compliance — HMRC (UK) and VAT
• Tax compliance — AvaTax (US)
• Balance sheet
• Trial balance