For government contractors, internal controls are not just a compliance exercise—they are the foundation of audit readiness, financial integrity, and long-term contract success. Yet many organizations operate with control gaps that go unnoticed until they are surfaced during an audit, often when the cost and complexity of remediation are significantly higher.

In fact, many of the most common issues we see—from insufficient documentation to inconsistent control execution—stem from processes that appear sound on the surface but lack the structure and oversight required to withstand regulatory scrutiny. If this sounds familiar, you may want to explore our companion article, common internal control gaps contractors often miss, which highlights where these breakdowns typically occur.

This checklist is designed to help you take a more proactive approach by evaluating your internal control environment through an audit readiness lens. While it is not a substitute for a formal assessment, it will help you identify areas of risk, strengthen documentation, and align your processes with the expectations of auditors, regulators, and contracting officers.

1.  ​Controls vs. How Work Actually Gets Done

• Have any key processes changed since the last time internal controls were formally reviewed?
• Are there steps that are routinely handled informally or skipped when things get busy?
• Would someone new to the organization describe the process the same way your documentation does?
• Are there controls that exist on paper but rely heavily on institutional knowledge to function?
• If a process failed, would it be obvious or would it take time to notice?

2.  ​Management Review (The Control Everyone Assumes Exists)

• What evidence shows that management reviews actually occurred?
• Is it clear what was reviewed versus what was simply received or acknowledged?
• Would someone else be able to tell, months later, what the reviewer was looking for?
• Are follow-ups documented when something looks off?
• Does the review process reflect how leadership actually oversees the business today?

3.  ​Segregation of Duties (As the Company Exists Now)

• Are the same individuals still wearing multiple hats due to growth or turnover?
• Have duties been reassessed since revenue, staffing, or systems changed?
• Are compensating controls in place where full segregation is not practical?
• Does reliance on trust replace documented checks in any key areas?
• Would an auditor see the same separation of responsibilities you believe exists?

4.  ​Systems and Access

• When was the last time user access was formally reviewed?
• Does access align with current roles, not historical responsibilities?
• Are access changes documented when employees change roles or leave?
• Are there users with broad permissions simply because “it was easier at the time”?
• Would you be comfortable explaining current access levels to someone unfamiliar with your systems?

5.  Ongoing Monitoring and Change

• Are controls revisited after periods of growth, reorganization, or system changes?
• Is there a clear owner responsible for noticing when a control no longer fits?
• Do controls evolve with the business, or only get attention during audits?
• Are monitoring activities intentional, or largely informal and assumed?
• If an auditor asked why a control still works today, would the answer be clear?

Completing this checklist is an important first step—but true audit readiness comes from action. Identifying gaps is only valuable if it leads to stronger controls, clearer documentation, and greater accountability across your organization.

Government contractors that take a proactive approach to internal controls are better positioned to avoid audit findings, reduce disruption, and maintain credibility with stakeholders. Just as importantly, a well-designed control environment supports scalable growth as your contract portfolio evolves.

If your review uncovers areas of concern, it may be time to take a deeper look at your processes, testing approach, and control design. The earlier these issues are addressed, the more flexibility you have to remediate them efficiently—before they become formal findings during an audit.

For guidance on how to prepare your organization, contact Neena Shukla, Government Contracting Team Leader, at PBMares.