Your board wants numbers it can trust, every month or quarter, with the exceptions explained. General Ledger gets you ready. Every journal entry, each posting in your books, checked for who made it, when, for how much and with whose approval, before your board sees the numbers.
What it checks
- Manual entry above threshold reviewed. A hand-posted journal entry above the amount you set has a reviewer who is not the person who prepared it.
- Preparer is not approver. No journal entry is prepared and approved by the same person.
- Period-end and backdated entries. An entry posted after a period closed but dated inside it, or posted in the period's last two days, is flagged.
- Round and just-below-threshold amounts. A hand-posted entry at a round amount, or just under an approval threshold, is flagged for a look.
- Rare account combination. An entry that moves money between a pair of accounts never paired before in your books is flagged.
- Accrual reversed. Every accrual, a cost booked before its bill arrives, reverses in the next period unless you have said it stands.
- Suspense and uncategorised cleared. No balance sits in a suspense or uncategorised account, the parking place for unknown items, for more than 30 days at period end.
- Sub-ledger ties. The payables, receivables, cash and asset balances in your ledger equal the totals of the detailed records behind them.
- Digit-pattern screen. The first digits of hand-posted entries are compared with the pattern real figures follow; a big gap is put to you as a question.
A finding, in its own words
Journal 1187 for $18,000.00 was prepared and approved by the same user on 30 June, the last day of the quarter, and posts to an account pair I have not seen before: Marketing expense against Accrued liabilities. Your rule says hand-posted entries above $10,000 need a second reviewer.
Suspense account 9999, where unknown items are parked, has held $2,340.00 since 3 May. Tell me where it belongs, or post it, and I will clear the finding.
What it may ask you
- Above what amount should a hand-posted journal entry get a second pair of eyes? Unless you say otherwise: 5000.
- How many days after month end do you close the books? Unless you say otherwise: 10.
- Which accounts do you park unknown items in? For example 'Suspense' or 'Uncategorised'. Unless you say otherwise: accounts named suspense or uncategorised.
- Any accruals that stay on the books rather than reversing next month? Name them.
- Any unusual account pairings that are normal for you? For example 'Marketing expense against Accrued liabilities'.
What it draws on
- Manual journal entries are reviewed by a second person. COSO Control Activities, principle 10; SOX: Journal entry controls.
- Review above a threshold, and patterns just below it. COSO Monitoring Activities, principle 16; SOX: Management review controls.
- Segregation of duties. COSO Control Activities, principle 10; SOX: Control activities over initiation, authorisation, recording and reporting.
- Entries are posted in the period they belong to, not after it closed. COSO Information and Communication, principle 13; SOX: Period-end journal cut-off.
- Cut-off. COSO Information and Communication, principle 13; SOX: Period-end financial reporting.
- Entries with the shape of a problem are surfaced. COSO Monitoring Activities, principle 16; SOX: Journal entry analytics.
- Accruals reverse and suspense accounts clear. COSO Information and Communication, principle 13; SOX: Period-end close controls.
- Period-end close is complete and timely. COSO Information and Communication, principle 13; SOX: Period-end financial reporting process.
- The ledger agrees with its sub-ledgers. COSO Information and Communication, principle 13; SOX: Sub-ledger to general ledger reconciliation.
What it needs
- your journal entries, every line, as a ledger export or through a Connection
- your chart of accounts, the list of accounts your books use
- your approval rules and the amount above which an entry needs a second reviewer, asked for only when a check needs them
- Connections, optional: QuickBooks or Xero, which bring every journal entry and the chart of accounts. A ledger export is enough to start.