What it is
A real estate entity holds property, collects rent and borrows against it. The audit follows those three flows: whether properties exist and are carried correctly, whether rent is complete and recognized on a straight-line basis where the lease requires it, and whether debt, escrows and covenants are properly recorded and classified.
The program covers rental revenue and tenant receivables, acquisition and development cost capitalization, depreciation and impairment, mortgage debt, lender escrows and deposits, sales of property, partnership capital, and related party management fees. Steps carry an assertion, sample-size note, W/P reference and sign-off.
When to use it
- Planning the audit of a rental property owner, developer, real estate partnership or fund.
- When the entity has construction in progress, capitalized interest, ground leases or lender reserves.
- To document how you test impairment and straight-line rent.
What’s inside
- Rental revenue, straight-line rent, recoveries and tenant receivables
- Property, acquisition and development costs, depreciation and impairment
- Mortgage debt, escrows, reserves and tenant deposits
- Property sales, ownership, partners’ capital and related parties
- Tie-outs and general procedures
Standard cited
This template follows AU-C 330 / ASC 360 / ASC 842 / ASC 970. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained.
Questions
When must a real estate entity test for impairment?
When events or changes in circumstances indicate that the carrying amount of a long-lived asset group may not be recoverable (ASC 360-10-35-21). Indicators include falling occupancy, a market decline, a significant cost overrun and an expectation of sale before the end of the useful life. Compare undiscounted cash flows to carrying amount first.
How should rent from a lease with escalations be recognized?
A lessor recognizes operating lease income on a straight-line basis over the lease term unless another pattern better reflects the use of the asset (ASC 842-30-25). Test the straight-line receivable by recomputing it for a sample of leases.
What do you confirm with the lender?
The balance, rate, maturity, escrow and reserve balances, covenant compliance and any default, guarantees and prepayment terms. Compare the lender’s covenant definitions with the entity’s calculation.
Related templates
- Audit Program: Fixed Assets
- Audit Program: Debt and Equity
- Fixed Asset Rollforward (Excel)
- Related Party Questionnaire for Management (AU-C 550 / ASC 850)
Last updated 11/05/2026. All free templates.