Core Concepts
The true goal of financial review beyond tying numbers.
What is proving the numbers make sense?
The report used to identify trends and anomalies over time.
What is the T12 statement?
Being too close to transactions and missing the big picture.
What is the proximity trap?
The T12 report is primarily used to identify these over time.
What are trends and anomalies?
Every balance on the GL reconciliation must have these three elements.
What are reason, support, and expected outcome?
When writing a variance note, avoid stating what?
What is the obvious?
The two key roles in financial review.
Who are the preparer and the reviewer?
The report that explains what exists and whether it should.
What is the balance sheet?
Assuming correct math means correct accounting.
What is the tie-out fallacy?
A missing recurring expense in a monthly trend is often called this.
What is a “hole”?
If an expense is missing from the T12, it must appear here.
What is a liability (accrual) on the balance sheet?
The three core questions asked in variance analysis.
What are “What changed?”, “Why did it change?”, and “Does it match the numbers?”
The preparer’s main responsibility.
What is identifying and explaining issues before submission?
The report that explains what changed and why.
What is the variance report?
Accounts that haven’t changed in 2–3 months.
What are stale balances?
If utilities are flat for 11 months and zero in month 12, you should check this.
What is the balance sheet for a missing accrual?
What causes a GL reconciliation to be incomplete?
What are missing GL accounts?
Simply stating “it’s an accrual” is considered this.
What is a weak explanation (the accrual trap)?
The reviewer’s main responsibility.
What is challenging assumptions and ensuring completeness?
If the three pillars do not align, this must exist.
What is an error?
A number without this is considered a risk.
What is a valid explanation?
This review method starts with net income and works upward.
What is the bottom-up approach?
Every prepaid expense must have this verified.
What is a future service date supported by a schedule?
The three parts of a strong variance note.
What are the what, the why, and the proof?
This type of mindset describes treating accounting as a series of steps rather than a connected story.
What is Checklist thinking?
The three-step process: detect, verify, and narrate.
What is triangulation?
Reviewing reports separately instead of connecting them is considered what kind of trap?
What is the isolation trap?
A single month may look fine, but this reveals issues.
What is the trend over time?
The balance sheet provides this type of proof for timing claims.
What is physical (or tangible) proof?
A variance without a corresponding balance sheet impact usually indicates this.
What is a misstatement?