A lead schedule (also known as a lead sheet) is an accounting tool used during an audit process. It’s a document that serves as a guide or index for a specific account within a company’s financial statements.
The lead schedule presents a summary of the detailed schedules, or sub-schedules, for an account and typically includes the following information:
- The account number and description.
- The balance at the beginning of the period.
- Additions and subtractions to the account during the period.
- The balance at the end of the period.
- Comparative information from previous periods.
- Any audit adjustments or reclassifications.
- The final audited balance.
The purpose of the lead schedule is to provide a roadmap of the account for the audit process, giving an overview of the transactions and balances within the account and directing the auditor to more detailed schedules.
The lead schedules form an integral part of the audit working papers and help ensure the audit is organized, efficient, and thorough. They are typically prepared by the auditors, not the company being audited.
Example of a Lead Schedule
Let’s consider a simple example of a lead schedule for an inventory account. Please note that this example is simplified, and actual lead schedules might include more detailed and complex information:
Inventory Lead Schedule for the Year Ended December 31, 2023
|Balance at 01/01/23
|Balance at 12/31/23
|Final Audited Balance
|Purchases during the year
|Cost of Goods Sold
|Inventory Write-offs (obsolete inventory)
|Ending Inventory (before audit adjustments)
|Audit adjustment (overstatement)
|Final Audited Inventory
In this example, the lead schedule presents a summary of the inventory account for the year, including the beginning balance, additions (purchases), subtractions (Cost of Goods Sold and write-offs), and the ending balance.
The auditor identified an overstatement during the audit, resulting in an audit adjustment of $20,000. This adjustment is deducted from the ending balance to arrive at the final audited balance of $1,080,000.
Remember that this is a simplified example. Real-world lead schedules could involve more complex transactions and calculations, and would likely be supported by numerous detailed sub-schedules.