Reconciliations
What are reconciliations performed with dual personnel oversight, known as?
What is a Reviewer and Preparer
When reviewing bank reconciliations what 3 things should you generally look at?
1. Does GL balance per reconciliation tie to the TB?
2. Does the TB tie back to the bank balance?
3. Do the uncleared transactions make sense?
What is not considered a reconciliation
What is the GL detail
What is the appropriate dollar materiality threshold for payroll-related accounts?
What is $0 materiality?
Payroll-related accounts should always zero out, or likely lead to a bigger issue.
What is all material balances
What is the primary purpose of conducting balance sheet reconciliations
What is to ensure accuracy and completeness of the financial reporting
When reviewing Accounts Receivable, name 3 items you should generally review
1. Review any payments not applied
2. Review super old invoices
3. For older systems, ensure AR aging ties back to sub ledger and Balance Sheet
What should you not tend to do when building out a balance sheet schedule in Excel?
Hardcode
What is the primary risk associated with bank reconciliations?
What is the risk of unauthorized transactions, uncashed checks, and inaccurate balances reflected on the financial statements?
What is the purpose of footnotes and tick marks on a balance sheet schedule?
Provide footnotes and reference supporting document to explain significant policies, calculations, and relevant information.
What is the general process for reconciling a balance sheet account?
What is to compare balances reporting on the GL with external statements or subsidiary ledgers?
What is to ensure that all transactions are properly recorded and classified?
What might be causing a negative balance on a specific line item in the prepaid expense schedule? What are ways to prevent this from happening?
2. Create a check to ensure the total amortization is equal to the total value of the line item
When items are added or removed from a Balance Sheet schedule, what should be included to prevent confusion and inefficiencies?
What is providing clear descriptions or explanations for reconciling items or adjustments made to the schedule?
Name several risk factors when not properly maintaining a deferred revenue account.
1. Inaccurate reporting of revenue.
2. Non-compliance of ASC 606
3. Audit issues
What should a balance sheet reconciliation ultimately tell you?
Quantifies what the balance consists of
What is the main purpose of the timeliness of reconciliations?
What is to detect errors promptly and ensure financial statements reflect the most current information?
What role does a clearing account serve?
What is temporarily holding transactions until properly categorized?
The balance should zero out every month. If there is a balance, investigate why. When does it eventually zero out?
What can you do to ensure consistency when rolling forward a balance sheet schedule
What is ensuring transparency through documenting assumptions, methodologies, processes, and policy changes?
What can be done to prevent risk associated with inventory?
1. Regular inventory counts
2. Implement a consistent inventory valuation method
3. Monitor and assess risk of obsolete inventory
4. Establish inventory controls
5. Documentation and policies
An item with a balance of $1,000 has been sitting on your prepaid schedule for 1.5 years. What is your next step?
What is recognizing missed amortization and expensing it on the profit and loss statement
What is important to understand when resolving discrepancies?
What is materiality?
What are 3 general items you should do when reviewing AP?
1. Review negative balances
2. Review outstanding balances
3. Are employees being listed on the AP aging
4. For older systems, ensure AP aging ties back to the sub ledger and Balance Sheet
Share your best practices for building a balance sheet schedule.
Best answer gets the points
What are the risks of not maintaining debt schedules?
1. Missed payments
2. Missed payments causing penalties, fines, or repayment of outstanding balances.
3. Audit and reporting issues
4. Cash flow issues
Why has an accrual of $1,000 remained on your accrued expenses for 2 years, and what potential issues could arise from this?
1. The invoice was coded incorrectly.
2. If the invoice was coded incorrectly, then we could have a duplicate expense.
3. We never received the AP bill.