Supporting the lease accounting audit

What auditors need from lease accounting

Lease accounting under IFRS 16 and FRS 102 involves significant judgements, particularly around discount rates, lease term determination, and option assessment. Auditors need to see not just the numbers, but the reasoning behind them and the calculation methodology that produced them.

AuditLease is built around this requirement. Calculations are versioned, judgements are recorded against the lease with who entered them and when, and outputs trace back to their inputs.

The evidence pack

The Audit Evidence Pack is an Excel workbook generated for one legal entity at a time. It is available on paid plans, and it is not part of the Free plan. It contains:

• Lease register: reference, description, status, standard, commencement and end dates, currency, discount rate, and exemption flags
• Accounting judgements: the rationale recorded against each lease, with the date it was recorded
• Discount rate evidence: the trail of suggested, accepted and overridden rates, with the benchmark source and date
• Modifications and period locks: the before and after balances for each modification, and the history of locked periods
• Calculation runs and journal batches: one summary row per calculation run and per journal batch. Full journal lines are exported separately

The draft statutory accounts note, with its movement tables and maturity analysis, is a separate export from the same workspace.

Immutable calculation history

Once a calculation run is completed and used to generate journals, it cannot be edited or deleted. If a lease is remeasured or modified, a new calculation run is created, and the full history of all previous runs is preserved.

This means auditors can see exactly what calculation underpins each balance, and can verify that journals match the calculation outputs.

Documented accounting judgements

AuditLease has a place for each of these accounting judgements on the lease record:

• The basis for the discount rate selected, including how the IBR (or, under FRS 102, the OBR) was determined
• The lease term determination, including whether optional periods have been included and why
• Whether any short-term or low-value exemptions have been applied, and the reasoning
• Any renewal, purchase, or termination option assessments

The create lease form requires the lease term and discount rate judgements. Leases imported from CSV, or created by any route other than the form, can be added without them, so the controls that follow matter. The Statutory Accounts Note raises a blocking warning when a lease in scope at the report year end (commenced, not terminated on or before it, not exempt) has no discount rate judgement, or has a renewal option with no renewal judgement, and the audit readiness report flags active or modified, non-exempt leases whose discount rate has neither a judgement nor attached evidence, or where an exemption is claimed without a written rationale.

Judgements are stored against the lease record and each type appears in the Audit Evidence Pack.

Read-only access for auditors

Clients can grant read-only access to their auditors. Auditors can view all lease data, calculation runs, judgement records, and evidence pack outputs without being able to modify anything.

Read-only access is available at the entity level, so if a client has multiple entities, access can be restricted to only the entities relevant to the engagement.

Planning the leases section

If you are planning the lease accounting work for an engagement, our IFRS 16 audit procedures checklist sets out procedures by assertion, the client evidence request list, and the misstatements that come up most often. The audit evidence checklist covers what a well-prepared client file should contain.