5 Signs Your Auditors Are About to Reject Your Lease Accounting Spreadsheets (And What to Do About It)

If you’ve been managing lease accounting in spreadsheets, you know that sinking feeling when audit season rolls around. Your auditors start asking questions, and suddenly those formulas you’ve been nursing along for months don’t seem quite so reliable anymore.

The truth is, spreadsheet-based lease accounting has become increasingly risky in the post-ASC 842/IFRS 16 world. Here are five warning signs that your auditors might push back on your lease accounting approach—and more importantly, what you can do about it.

1. Your Audit Trail Looks Like a Mystery Novel

When your auditor asks, “Who changed this discount rate and when?”—and you can’t answer with certainty—that’s a red flag.

Spreadsheets offer minimal audit trail functionality. Multiple people can access and modify files, often with limited tracking of who changed what and why. According to research published in the Journal of Accountancy, spreadsheet errors occur in roughly 88% of all spreadsheets, many stemming from untracked modifications.

What to do: Implement version control protocols immediately. At minimum, use dated file names and maintain a change log. Better yet, consider purpose-built lease accounting software that automatically tracks every modification with user stamps and timestamps.

2. Your Modification Calculations Don’t Match Lease by Lease

Lease modifications are where spreadsheet accounting falls apart spectacularly. When you modify a lease term or payment amount, ASC 842 requires specific remeasurement calculations based on the modification type. Getting this wrong even once can cascade errors across your entire portfolio.

If your auditors start spot-checking modification calculations and finding inconsistencies in your methodology, expect scrutiny on your entire lease population.

What to do: Document your modification methodology clearly for each lease type. Create standardized templates for common modification scenarios. Most importantly, have a second reviewer verify modification calculations before they’re finalized.

3. You Can’t Quickly Prove Completeness

“How do you know you’ve captured all your leases?” This question should be easy to answer. But if you’re managing leases across multiple spreadsheets, tracking them through email threads, or relying on departmental memory, proving completeness becomes nearly impossible.

The risk isn’t theoretical. Research by Deloitte found that identifying and collecting complete lease data remains one of the top challenges organizations face in lease accounting compliance.

What to do: Establish a centralized lease repository—even if it’s still spreadsheet-based initially. Implement a lease intake process that captures all new leases at origination. Conduct periodic lease discovery exercises across departments to identify embedded leases and shadow IT contracts.

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4. Your Reconciliations Take Days (Not Hours)

When your auditors request a reconciliation between your lease liability and right-of-use asset balances to your general ledger, how long does it take? If the answer is “several days” or involves frantic recalculation sessions, your auditors will question the reliability of your month-end close process.

Complex spreadsheet models with multiple worksheets and intricate linking formulas are prone to breaking. One wrong cell reference can throw off your entire balance sheet.

What to do: Simplify your spreadsheet architecture as much as possible. Build in automated reconciliation checks that flag discrepancies immediately. Consider creating a month-end close checklist that includes specific validation steps for lease accounting calculations.

5. You’re Still Making Manual Journal Entries

If you’re manually calculating and entering lease-related journal entries each month, you’re introducing unnecessary risk. Manual processes are error-prone, and auditors know it.

Furthermore, as your lease portfolio grows, manual entry becomes increasingly unsustainable. What worked for 50 leases becomes unmanageable at 200 leases.

What to do: At minimum, automate your journal entry preparation through Excel macros or templates that pull from your lease calculation sheets. This reduces transcription errors and creates consistency. However, the most reliable solution is implementing dedicated lease accounting software that automatically generates journal entries based on your lease data.

The Bigger Picture

These warning signs share a common theme: spreadsheets weren’t designed for the complexity of modern lease accounting standards. While they can work for small lease portfolios with simple terms, they quickly become a compliance risk as complexity increases.

If you’re seeing multiple warning signs on this list, it’s time to have an honest conversation with your team about your lease accounting infrastructure. Your auditors are looking for accuracy, completeness, and control—three things that become exponentially harder to demonstrate as you scale spreadsheet-based processes.

The good news? Addressing these issues now—before your auditors flag them—puts you in a much stronger position. Whether that means tightening your spreadsheet controls or investing in purpose-built lease accounting technology like EZ Lease, taking action today prevents painful audit findings tomorrow.

Got more lease accounting questions? Our experts have answers in this on-demand webinar.

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