Audit readiness: "Do a GAAP tie-out and tell me what an accountant would flag"

GAAP Audit & Tie-Out Report — Economico

Audit Headline: The books are mathematically consistent and tie out perfectly, but they are not fully audit-ready. We have identified one Material Finding regarding missing period-end expense accruals that overstates Net Income by $6,900.00 (19.5%), along with minor revenue recognition adjustments and significant concentration risk disclosures that must be addressed before year-end.

1. Scope & Materiality

• Accounting Basis: Accrual Basis (under US GAAP).
• Reporting Currency: USD (all figures reported below in both major units and minor units/cents).
• Materiality Threshold: $422.69 (42,269 cents), calculated as 1.0% of Total Assets / Total Revenue. Items above this threshold are treated as Material; items below are treated as Minor/Clerical.
• Current Ledger Date: June 29, 2026 (based on invoice creation timestamps).

2. Foundational Integrity & Statement Tie-Out

The general ledger passes all baseline arithmetic and structure tests within the USD ledger:

• The Accounting Equation Ties: Assets = Liabilities + Equity → 4,226,900 cents = 690,000 cents + 3,536,900 cents → $42,269.00 = $6,900.00 + $35,369.00 (PASS)
• Net Income Roll-Forward Ties: Revenue − Expenses = Net Income → 4,226,900 cents − 690,000 cents = 3,536,900 cents → $42,269.00 − $6,900.00 = $35,369.00 (PASS)
• Retained Earnings Integration Ties: Net Income of $35,369.00 (3,536,900 cents) flows perfectly into Retained Earnings (Account 3200) on the Balance Sheet.
• Sign and Contra Checks: All balances sit in their normal debit/credit postures. Contra accounts (e.g., 1130 Allowance, 1220 Accumulated Depreciation) are at zero, which is appropriate given that there are currently no capitalized physical/intangible assets on the books and all Accounts Receivable are current.

3. Ranked Audit Findings

Finding 1: Missing June Accruals for Incurred-But-Unbilled Hosting & AI Costs

• Severity: Material (Overstates Net Income by 19.5%; well above materiality).
• GAAP Principle: Matching Principle / Completeness (ASC 340 / ASC 220). Expenses must be recognized in the period they are incurred, regardless of when the vendor bill is received.
• Evidence:
  • Vendor bills for AWS (e5659875-98f8-47c1-90ca-19adffa18c71) of $4,800.00 (480,000 cents) and OpenAI (3a665cda-c64e-4fae-86cd-09245df29296) of $2,100.00 (210,000 cents) have due dates of June 15, 2026. Because vendor billing runs in arrears, a mid-June due date indicates these represent May 2026 usage.
  • As of June 29, 2026, no expenses or accruals have been recorded for June 2026 usage, despite active, recurring vendor obligations for AWS (7b739a28...) and OpenAI (8e70ba5c...).
• Financial Impact:
  • Hosting and Infrastructure (5300) is understated by $4,800.00.
  • AI and LLM Inference Costs (5400) is understated by $2,100.00.
  • Accrued Expenses (2120) is understated by $6,900.00 (690,000 cents).
  • Net Income is overstated by $6,900.00 (adjusted Net Income should be $28,469.00 instead of $35,369.00).
• Recommended Correcting Journal Entry:
  • Dr 5300 Hosting and Infrastructure — 480,000 cents ($4,800.00)
  • Dr 5400 AI and LLM Inference Costs — 210,000 cents ($2,100.00)
  • Cr 2120 Accrued Expenses — 690,000 cents ($6,900.00) (To be posted via the expense-tracking skill or raw journal tool).

Finding 2: Unearned Subscription Revenue Recognized Entirely in June

• Severity: Minor (Immaterial; impact of $18.37 is below the $422.69 threshold).
• GAAP Principle: Revenue Recognition (ASC 606). Revenue from monthly SaaS subscriptions must be recognized ratably over the performance period as control of the service is transferred over time.
• Evidence:
  • Invoice 5070ea99-6ce9-4217-b678-0adfb704829c (Oak & Co) contains a line “June Starter plan” for $19.00 (1,900 cents), issued on June 29, 2026.
  • If this subscription runs from June 29 to July 28, only 1 day of the service ($0.63) has been earned in June.
• Financial Impact:
  • Subscription Revenue (4110) is technically overstated by $18.37 (1,837 cents).
  • Unearned Revenue (2150) is understated by $18.37.
• Recommended Correcting Journal Entry (if precision is desired at close):
  • Dr 4110 Subscription Revenue — 1,837 cents ($18.37)
  • Cr 2150 Unearned Revenue — 1,837 cents ($18.37) (To be posted via the invoicing or raw journal tool).

Finding 3: Significant Customer Concentration Risk

• Severity: Observation / Disclosure Note (No current misstatement, but an auditor-flagged disclosure requirement).
• GAAP Principle: Concentration Risk / Full Disclosure (ASC 275). Entities must disclose significant concentrations in the volume of business handled with a particular counterparty if it is reasonably possible that the concentration makes the entity vulnerable to a near-term severe impact.
• Evidence:
  • Kinoko Bank (627ba977-c79c-4941-b4c7-06babd12416e) has an outstanding invoice of $42,000.00 (4,200,000 cents), which represents 99.36% of total revenue and 99.36% of total Accounts Receivable.
• Financial Impact: No direct adjustments to ledger balances are required.
• Recommended Action: Draft a formal footnote disclosure for the financial statements:

  “As of June 30, 2026, a single customer accounted for 99.4% of the Company’s Accounts Receivable and 99.4% of its revenue for the period then ended. The loss of this customer would have a material adverse effect on the Company’s financial position.”

Finding 4: Internal Controls — Zero Cash Activity

• Severity: Observation (No misstatement, but highlights an operational control gap).
• GAAP Principle: Internal Control over Financial Reporting (ICFR).
• Evidence:
  • The balance of Cash and Cash Equivalents (1110) is $0.00.
  • All customer invoices ($42,269.00) are unpaid (status: sent in AR), and all vendor bills ($6,900.00) are unpaid (status: sent in AP).
• Financial Impact: None.
• Recommended Action: Once banking/wallets are linked, ensure bank reconciliation protocols are set up immediately. Do not allow manual journal adjustments to Cash (1110) without matching bank feed support.

4. Period-End Estimates Outstanding Close Checklist

Below is the close-checklist status of accrual adjustments that must be made before formalizing your year-end/period-end books:

5. Reproducibility & Disclaimer

• Read-Only Audit: This review was performed utilizing read-only data pulls. No journals have been posted, modified, or voided during this review.
• Audit Tools Utilized:
  • list_chart_of_accounts
  • get_balance_sheet
  • get_income_statement
  • get_balances
  • get_invoices (with & without IDs)
  • get_bills
  • list_contracts
  • list_obligations
  • get_saas_metrics
  • summarize_revenue
• Standard Disclaimer: This report is a financial books review for internal management compliance purposes and does not constitute a formal, third-party audit opinion or attestation engagement under AICPA (SSARS) or PCAOB standards.