An international audit can feel like a much bigger event than the usual year-end accounting process.
There are more people involved, more documents to provide, and often more questions from auditors who aren’t sitting in the same office as your finance team.
For an Israeli business that is part of a global group, has international investors, or reports to a foreign parent company, the audit may also need to connect Israeli financial reporting with international reporting requirements.
That’s where preparation makes all the difference.
A well-prepared finance team doesn’t wait for the auditors to ask for every document. It gets the numbers, reconciliations, contracts, and supporting evidence ready before the audit begins.
So, how can an Israeli business prepare for an international audit?
What makes an international audit different?
The basic purpose of an audit remains the same: auditors need sufficient evidence to assess whether the financial statements are presented fairly in accordance with the applicable reporting framework.
But an international audit can involve additional layers.
For example, an Israeli subsidiary may need to provide financial information to a parent company in the US or Europe.
The local entity may maintain its books in Israeli shekels (ILS), while the parent company reports in USD or EUR.
The Israeli company may also operate under local tax and regulatory requirements while the group uses IFRS or US GAAP for consolidated reporting.
The result is a process where local and global financial information needs to fit together.
Start with the audit requirements
Before collecting documents, understand exactly what the auditors are going to need.
The parent company or audit team may provide a detailed Prepared by Client (PBC) list.
This can include requests for:
- Financial statements
- General ledger
- Trial balance
- Bank statements
- Bank confirmations
- Accounts receivable
- Accounts payable
- Payroll records
- Tax documents
- Customer contracts
- Supplier agreements
- Fixed asset schedules
- Intercompany balances
- Revenue documentation
- Expense support
- Equity records
- Legal agreements
Don’t treat the PBC list as a box-ticking exercise.
Use it to build an internal audit checklist and assign an owner to every request.
Make sure the books are closed
Before the audit begins, the company’s financial records should be as complete as possible.
That means completing the normal month-end or year-end close process.
Key areas include:
- Bank reconciliations
- Accounts receivable
- Accounts payable
- Accrued expenses
- Prepaid expenses
- Payroll
- Fixed assets
- Depreciation
- Revenue
- Deferred revenue
- Taxes
- Intercompany transactions
- Foreign exchange
The auditor should not be discovering basic bookkeeping issues during fieldwork.
The cleaner the books are before the audit starts, the more attention can be focused on the areas that actually require judgment.
Reconcile the bank accounts
Bank reconciliations are one of the simplest places to start.
For every relevant account, make sure the balance in the accounting system can be reconciled to the bank statement.
Investigate outstanding items rather than simply carrying them forward month after month.
Auditors may ask about:
- Outstanding checks
- Unidentified deposits
- Transfers between accounts
- Unusual payments
- Large transactions
- Restricted cash
If there are several bank accounts or currencies, each one should be properly documented.
Review accounts receivable
Auditors may test whether receivables actually exist and whether they are likely to be collected.
Before the audit, review the Accounts Receivable Aging Report.
Look for:
- Old outstanding balances
- Large customer balances
- Disputed invoices
- Credit notes
- Customers with payment issues
- Balances that may require a provision
If a customer owes the company a significant amount and hasn’t paid for a long time, don’t wait for the auditor to ask why.
Understand the situation and prepare the supporting documentation.
Review accounts payable and accrued expenses
The same principle applies to suppliers.
Make sure outstanding invoices are recorded correctly and investigate unusual balances.
One area auditors may focus on is the possibility of unrecorded liabilities.
For example, a supplier may have provided services before year-end but sent the invoice afterward.
The finance team should consider whether an accrual is required so that the expense is recorded in the appropriate period.
This is one reason the period immediately after year-end can be important during an audit.
Pay special attention to revenue
Revenue is often an important audit area.
The finance team should be able to explain:
- How revenue is generated
- When revenue is recognized
- Which systems generate billing data
- How contracts are handled
- How refunds and credits are recorded
- How deferred revenue is calculated
- How contract changes are treated
For SaaS businesses, this can become particularly important because contracts may include annual subscriptions, upgrades, discounts, implementation services, or usage-based fees.
The accounting records should be supported by the underlying contracts and billing data.
Check intercompany balances
For companies that are part of a multinational group, intercompany reconciliation deserves special attention.
The Israeli entity may have balances with:
- The parent company
- Other subsidiaries
- Shared-service entities
- Group suppliers
The balance recorded in Israel should generally be reconciled with the corresponding balance recorded by the other entity.
Auditors may also request supporting agreements, invoices, calculations, and explanations for significant intercompany balances.
Don’t leave this until the last minute.
Intercompany differences have a habit of multiplying when nobody deals with them.
Prepare for transfer pricing questions
International groups with related-party transactions may also need to provide information relevant to transfer pricing.
For example, an Israeli R&D subsidiary may provide development services to its foreign parent.
The audit team may want to understand:
- The nature of the services
- The contractual arrangement
- How the Israeli entity is compensated
- Related-party balances
- Supporting invoices
- Transfer pricing documentation
Transfer pricing is primarily a tax matter, but the underlying transactions can also affect the financial statements.
Finance, tax, and legal teams should therefore work from the same information.
Review payroll and employee-related costs
Payroll can represent a significant expense for Israeli technology companies.
Before an international audit, make sure payroll records reconcile to the general ledger.
Review:
- Gross salaries
- Employer costs
- Bonuses
- Commissions
- Benefits
- Pension contributions
- Vacation balances
- Severance-related obligations
- Employee advances
- Equity compensation
If the company has employees who joined or left during the year, make sure the related records are complete.
Don’t forget employee options
Equity compensation can create additional accounting considerations.
If the company has an ESOP or employee option plan, the finance team should have an up-to-date record of grants, vesting, exercises, cancellations, and other relevant activity.
The records should be consistent with the company’s legal and equity documentation.
This is another area where small differences between HR, legal, finance, and the company’s Cap Table can create unnecessary questions.
Review foreign currency balances
Israeli companies working with international customers or group companies often hold foreign currency balances.
Before the audit, review:
- USD balances
- EUR balances
- Foreign currency receivables
- Foreign currency payables
- Foreign currency loans
- Intercompany balances
- Exchange rate adjustments
The accounting treatment should be consistent with the applicable reporting framework and the company’s accounting policies.
The finance team should also be able to explain significant foreign exchange gains or losses during the year.
Check fixed assets
Create an updated fixed asset schedule.
It should be possible to reconcile:
Opening balance + additions – disposals – depreciation = closing balance
Review significant purchases during the year and make sure they are supported by invoices and other documentation.
Also check whether any assets have been disposed of, become obsolete, or require a different accounting treatment.
Review tax balances
An international audit may involve questions about both Israeli and foreign tax matters.
Depending on the structure of the business, the audit team may request information relating to:
- Corporate income tax
- VAT
- Payroll taxes
- Withholding tax
- Tax provisions
- Deferred tax
- Foreign tax exposure
- Tax assessments
- Open tax matters
The finance team should work closely with the company’s tax advisers to ensure that the information provided to the auditors is complete and consistent.
Organize your supporting documents
A common mistake is to collect documents only after the auditor requests them.
Instead, create a structured audit folder or Data Room.
For example:
01 – Financial Statements
02 – Bank
03 – Accounts Receivable
04 – Accounts Payable
05 – Revenue
06 – Payroll
07 – Tax
08 – Fixed Assets
09 – Intercompany
10 – Equity / ESOP
11 – Legal
The exact structure isn’t important.
Consistency is.
When someone asks for a document, the finance team should know where to find it.
Build an audit trail
A good audit trail connects a number in the financial statements to the underlying evidence.
For example:
Financial statement → General ledger → Transaction → Invoice → Contract → Payment
If the finance team can move through this chain quickly, audit requests become much easier to handle.
This is especially important for unusual or material transactions.
Prepare explanations for unusual movements
Auditors will often compare current-year numbers with previous periods.
Large changes naturally attract attention.
For example:
| Account | 2025 | 2026 | Change |
|---|---|---|---|
| Revenue | $8M | $11M | +37.5% |
| Payroll | $3M | $4.8M | +60% |
| Marketing | $900K | $1.5M | +66.7% |
There may be perfectly good reasons for these changes.
Perhaps the company doubled its workforce.
Perhaps it entered a new market.
Perhaps revenue grew because of several major contracts.
The point isn’t to avoid questions.
It’s to prepare the answers before the questions arrive.
Identify potential problem areas early
Before the audit begins, perform an internal review.
Ask:
- Are there old receivables?
- Are there unexplained bank items?
- Are there large manual journal entries?
- Are there unusual related-party transactions?
- Are there contracts with unusual terms?
- Are there missing invoices?
- Are there unreconciled intercompany balances?
- Are there tax issues still being resolved?
- Are there differences between local and group reporting?
Finding an issue internally is usually much easier than discovering it halfway through the audit.
Create an audit calendar
International audits involve people across different locations and time zones.
A simple calendar can make the process much smoother.
| Stage | Responsibility | Target |
|---|---|---|
| Year-end close | Finance | Day 1–10 |
| Reconciliations | Finance | Day 5–12 |
| PBC preparation | Finance | Day 8–15 |
| Auditor requests | Finance + teams | Day 15+ |
| Management review | CFO / Finance | Before finalization |
| Final adjustments | Finance + auditors | Before sign-off |
The actual timeline will vary by company.
What matters is that everyone knows what needs to happen, who owns it, and when it needs to be completed.
Common mistakes to avoid
Starting too late
Waiting for the auditors to arrive before preparing documentation creates unnecessary pressure.
Sending incomplete information
A missing page or unsupported number can lead to another round of questions.
Ignoring small reconciliations
Small differences can become large problems when they accumulate.
Giving inconsistent answers
If finance, tax, HR, and legal teams describe the same transaction differently, auditors will naturally ask more questions.
Relying on one person
If only one employee knows where everything is, the audit becomes dependent on that person.
Making unsupported adjustments
Journal entries should have a clear purpose and supporting documentation.
The bottom line
An international audit doesn’t have to become a fire drill.
The companies that handle audits smoothly usually aren’t the ones with perfect books and zero questions.
They’re the ones that know their numbers, understand their transactions, and have the documentation to support them.
For an Israeli business operating within a global organization, preparation also means making sure local accounting and global reporting work together.
Close the books properly. Reconcile the balances. Organize the documents. Review unusual transactions. Prepare explanations for significant movements. And make sure finance, tax, HR, and legal teams are working from the same information.
When the auditors arrive, the goal isn’t to hope they don’t find anything.
The goal is to already know what they’re going to find – and why.
