For many UK finance teams, implementing the revised FRS 102 lease accounting requirements is the immediate priority. But implementation isn't the finish line. Your first audit under the new standard is where the real test begins.
Auditors won't simply be checking whether your lease liability agrees to the balance sheet. They'll want to understand how those numbers were produced, what controls are in place, and whether your lease accounting process can stand up to scrutiny. Increasingly, they're auditing the process as much as the accounting.
If your first FRS 102 audit is approaching, here are a few practical checks worth completing before your auditors arrive.
1. Confirm you've identified every lease
One of the most common audit issues is an incomplete lease population. Property leases are usually well documented, but it's often the smaller contracts that are overlooked. Vehicles, IT equipment, warehouse equipment, photocopiers and even embedded leases within service agreements can all fall through the cracks.
A complete lease register is the foundation of a successful audit. If you're unsure whether a contract contains a lease, the lease identification checklist walks through the test.
2. Keep supporting documents together
Every lease should have a complete audit trail, including the original contract, amendments, renewal notices, rent review documentation and any correspondence supporting significant accounting judgements.
If locating a contract means searching through multiple inboxes or shared folders, your audit is likely to become slower and more expensive.
3. Challenge your key assumptions
Many audit questions aren't about the calculations themselves but about the assumptions behind them.
Review areas such as:
- Lease terms and extension options
- Discount rates
- CPI or inflation-linked rent increases
- Low-value and short-term exemptions
- Variable lease payments
Being able to explain why a judgement was made is often just as important as demonstrating the calculation. The lease judgement checklist is a simple way to record them.
4. Test how you manage lease changes
Very few lease portfolios remain static throughout the year. Renewals, rent increases, modifications and early terminations all need to be reflected correctly.
Ask yourself a simple question: if an auditor selected a lease that changed six months ago, could you clearly demonstrate what changed, when it changed and how the accounting was updated?
5. Review your controls
Strong controls build confidence during an audit. Consider whether you can clearly answer questions such as:
- Who approves new leases?
- Who reviews accounting changes?
- Is there a complete audit trail?
- Are previous accounting periods protected from accidental changes?
- Can every journal be traced back to its source?
These controls are difficult to maintain in complex spreadsheets and are increasingly expected as part of a well-governed finance process. Rubli for FRS 102 builds them in, with approvals, locked periods and a full audit trail.
6. Prepare your reports before year-end
Don't wait until the week before the audit to generate disclosure reports. Review your maturity analysis, movement schedules, right-of-use assets and lease liability reconciliations well in advance. Early preparation gives you time to identify inconsistencies before your auditors do.
Audit Readiness Starts Long Before the Audit
The smoothest FRS 102 audits aren't the result of last-minute reconciliations. They're the outcome of consistent processes, good documentation and reliable controls throughout the year.
For a closer look at each area, our article on what your auditor will look for under FRS 102 goes into the detail. And if you're still bringing leases onto the balance sheet, the free FRS 102 readiness check takes two minutes and shows where to focus first.
After all, the best audit is the one where there are no surprises.
