The accruals auditors ask about at year end, and what to keep

Short answer: At year end, auditors mainly want to know whether your liabilities are complete. They search for bills that relate to the year but were not recorded, and they test the larger estimates: payroll and bonus, professional fees, commissions, and usage-based costs such as hosting.

The audit moves faster when each accrual has a stated basis, a calculation and a document behind it, and when payments made after year end can be matched to the accruals list. This guide covers the accruals that auditors ask about most at SaaS and subscription businesses, and the support finance should keep for each one.

Why auditors test accruals for completeness

Auditors focus on whether accruals are complete because the risk with liabilities runs in one direction. A company under pressure to report a stronger result is more likely to leave a cost out than to add one. A missing accrual overstates profit and understates liabilities, so the audit work is built to find costs that belong in the year but are not in the ledger.

That shapes the questions. Auditors will ask how you identified the accruals you booked, what you did to find the ones you might have missed, and how you estimated the amounts. A list of accruals with no explanation of how it was compiled invites more testing, not less.

The search for unrecorded liabilities

The search for unrecorded liabilities is a test of bills and payments after year end. The auditor selects payments made, and bills received, in the weeks after the balance sheet date, and checks whether each one relates to goods or services received before year end. Where it does, it should appear in accounts payable or accruals at year end.

Finance can prepare for this test with four items:

• A payments listing after year end, covering the period the auditor expects, with the service period noted for larger payments.
• Bills received but not yet entered at the date of the audit, including those waiting for approval.
• The accounts payable aging at year end, reconciled to the ledger.
• The year-end accruals listing, with each line naming the supplier, the period and the basis of the amount.

Where a post-year-end bill was accrued at an estimate, show the accrual and the bill side by side. Differences are expected; a large unexplained one leads to more questions about the method.

Payroll, bonus and paid time off accruals

Payroll-related accruals are often the largest at a SaaS business, and auditors test both the amount and the obligation behind it.

• Unpaid wages. When the last payroll run falls before year end, accrue the days worked but not yet paid, with the employer payroll taxes on them.
• Bonuses. Accrue the bonus earned in the year based on the plan terms and performance against them. Keep the plan document, the calculation, and the approval of the payout, even if the approval came after year end.
• Paid time off. Where the policy lets employees carry or cash out unused leave, the earned balance may be a liability. Keep the policy and the balance report from the payroll or HR system.

Professional fees

Professional fees are a common source of unrecorded liabilities because legal and advisory firms often bill well after the work is done. Ask each regular firm for work in progress at year end, and keep that confirmation as support for the accrual.

Legal fees deserve particular care, because auditors may also ask the company's lawyers about open matters. The fees accrued should be consistent with the work those confirmations describe. The treatment of the fee for the audit itself is a policy point; agree it with your auditor and apply it the same way each year.

Sales commissions

Commissions earned by the sales team in the year but paid afterward are an accrued liability at year end. The accrual should tie to the commission plan, the deals closed in the year, and the payout schedule. Auditors will often recalculate a sample from CRM deal data, so keep the deal list used for the calculation.

Commissions also raise a second question for subscription businesses. Under ASC 606 and IFRS 15, commissions may need to be assessed as costs of obtaining a contract, separately from the year-end accrual. The ASC 606 audit checklist for SaaS CFOs covers the wider ASC 606 audit questions.

Utilities, hosting and usage-based costs

Usage-based costs are billed after the month they relate to, so the December cost is usually unbilled at year end. For SaaS businesses this mostly means cloud hosting, data and API usage, and third-party tools priced on volume, with office utilities a smaller item.

Base the accrual on the usage report from the vendor's console where one exists, or on the run rate of recent bills. Keep the report or calculation, and once the bill arrives, keep the comparison between estimate and actual. A consistent record of small differences is good evidence that the method is reasonable.

The support finance should keep for each accrual

The table below sets out the support auditors typically ask to see for each type of accrual.

The same principle applies to journals prepared with automation: each one should show its source, its preparer and its approver. What auditors accept as an AI close audit trail covers that in detail, and a monthly routine for collecting the support is part of a SaaS month-end close checklist.

How ScaleXP supports accrual evidence

ScaleXP builds accruals from draft bills, purchase orders and your Xero or QuickBooks data, and prepares the accrual schedules and journals. The journals are posted once finance approves them, and each one can be traced back to its schedule and the supplier invoice. Supplier invoices trigger the release of the accrual, which links the estimate to the bill that replaced it.

In the ScaleXP demo company below, a supplier accrual of $1,000 a month is in the journal for July to September 2026, with the issued bill behind it shown underneath.

That traceability is collected through the year, so the year-end accruals listing is not rebuilt from scratch. More detail is on the ScaleXP accruals page and under month-end close automation.

Conclusion

Year-end accrual testing is mostly about completeness. Auditors look for bills after year end that should have been accrued, and they test the estimates behind payroll, bonus, professional fee, commission and usage accruals. A listing that names the basis and support for each accrual, kept up month by month, answers most of their questions before they are asked.

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