Reconciliations (avoiding management letter comments, part 7)

One part of a good system of internal controls is performing reconciliations between general ledger accounts and supporting documentation or subsidiary ledgers.  The timing of the reconciliations depends on the account.  Completing reconciliations in a timely manner helps to find differences and errors and allows the organization time to look into any problems prior to completing year-end financial statements.

Some of the accounts that should be reconciled monthly are cash, investments, account receivables, and account payables.  Salary expense should be reconciled on a quarterly basis to the Form 941s that are filed.  A reconciliation between the contributions per the general ledger and the contribution database can be performed on a monthly, quarterly or yearly basis.

One way to stay on top of reconciliations is to create a checklist of reconciliations to be performed on a monthly, quarterly, and yearly basis.  This checklist would serve as a reminder of what reconciliations to complete when and could also provide a sense of accomplishment when the reconciliations are checked off each time they are completed.

This is part 7 of a continuing series on common management letter comments and how to avoid them.  Click to read part 1, part 2, part 3, part 4, part 5, and part 6.