Professional Documents
Culture Documents
Best in Class Practices - Record To Report
Best in Class Practices - Record To Report
for
Record to Report Tower
Index
Topic Slide No.
Maintain Chart of Accounts 3-4
Journal Creation and Posting 5-6
Journal Entries - Accruals, Recurring, Reallocation/Redistribution 7-8
and Reversal Entries
Foreign Exchange Revaluation 9-10
Inter company Accounting and Reconciliation 11-12
Account Reconciliation 13-14
Bank reconciliation 15-16
Reconciliation and Closing Process 17-18
Consolidation and Reporting 19-21
2
Maintain Chart of Accounts
Best Practices Sox Controls
• Common Chart of Accounts adopted across the group with common data structure and
accounting conventions.
• Controls over creation of new account codes, include account codes created after obtaining
necessary approvals, access to create new account codes restricted, there is segregation of
access rights between creation / maintenance of account codes and deletion of codes /
transaction processing.
• Periodic review of Chart of Accounts – For identifying account codes remaining unused or
used very few times during the year, changing status of codes not likely to be used into
’inactive’ to ensure that transactions are not booked into them inappropriately
3
Maintain Chart of Accounts
Best Practices Sox Controls
Control Objective Control Activity
Creation and changes to the There is a one-to-one check of the account details entered into system comparing all
chart of accounts are critical fields of information from a post input/update report to the source documents.
processed completely and Discrepancies, if any, are identified and re-entered.
accurately. A duplicate check for account description is performed prior to creation of a new account
code.
An independent individual who is not involved with preparing or processing the changes
performs the check.
System configuration settings will not allow changes to be made outside certain pre-
defined parameters (such as, system will not allow duplicate account numbers, will allow
account heads to be created only within pre-defined number ranges etc).
In case alternative chart of accounts are required to be defined at a particular country level
for a statutory requirement, alternative account numbers, authorized by the relevant client
personnel, are used to set up connection between the accounts in the global standard chart
of accounts and the account in the country level chart of accounts
Changes to the chart of Changes to Chart of Accounts are made only on the basis of approved requests. All such
accounts are approved. requests are approved by authorized individuals, in line with authorization matrix defined.
Ability to modify Chart of Ability to effect modification to Chart of Accounts is restricted to authorized individuals
Accounts is restricted only to as defined by Client.
authorized users.
4
Journal Creation and Posting
Best Practices Sox Controls
• Electronic Approval of journal entries through workflow system clearly incorporating authority
levels
• Validation of journal entries for proper account code and transaction amount
• Review by approving manager with source documents including date of journal entry /
posting to ensure that entry is recorded in appropriate period
5
Journal Creation and Posting
Best Practices Sox Controls
6
Journal Entries - Accruals, Recurring and Reversal Entries
Best Practices Sox Controls
• Maintain period end closing entries/adjustment entries as a set through an automated
solution such as workflow tool to include entries necessary for accounting period end such
as cut-off accruals, depreciation, amortisation.
• One-to-one validation check of the master list of recurring period end closing
entries/adjustments to the journal entries actually recorded for completeness
• Use of standard and authorised input forms for journals
• Automatic upload of journal entries in system from pre-defined templates
• Variable journal input types – such as Standard/Recurring/Reversal and automation of all
manually produced recurring entries as possible
• Analysis and real time adjustments throughout the month for posting journal entries as
appropriate to manage month end bulk corrections
• Allocation Rules defined upfront for reallocation/redistribution of expenses/account heads
based on agreed rates
• Review of all recurring and non-recurring journal entries to ensure proper authorisation and
availability of adequate supporting documentation for each of them
• Preparation of period end procedure manuals – with timelines and responsibilities clearly
defined
• Perform periodic (monthly, annual) updates e.g. renew calendar dates for automatic journals
7
Journal Entries - Accruals, Recurring and Reversal Entries
Best Practices Sox Controls
8
Foreign Exchange Revaluation
Best Practices Sox Controls
• Automatic Restatement of Outstanding Foreign Currency Balances
• Restricted Access for uploading of exchange rates and to Exchange Rate Master
• Independent Verification of rates uploaded in system for ensuring accuracy of data uploaded
• Approval and Verification of Journal Entries for restatement of balances and recognising
gain/loss with supporting documentation, when done manually
9
Foreign Exchange Revaluation
Best Practices Sox Controls
10
Inter company Accounting and Reconciliation
Best Practices Sox Controls
• Clearly defined policies and procedures for inter company accounting identifying the nature
and type of transactions allowed and communication process for audit trail and accountability
for key activities
• Cut-off dates clearly defined for processing of Inter-Company transactions – Cut-off dates to
be prior to close
• Common Account Codes used for Inter Company transactions – Separate Inter Company
Accounts for each entity Account Codes mapped to each entity
• Intercompany to be set up as a separate category of vendors/customers in the master
• Standard Documents/Inter-Company Invoice used
• Monthly confirmation and reconciliation of Inter Company Transactions
• Use of reconciliation tool for automatic reconciliation
• Use of standard reconciliation forms
• Use of Inter-Company Close Calendar
• Minimum threshold limits are defined for reducing volumes and disputes
• Agree intercompany balances with counterparty as appropriate
• Dispute Resolution Policy defined – Treatment of disputed transactions/Deadlines for
resolving/Account Code to be used for recording disputes to be defined
• Periodic monitoring of disputed items
11
Inter company Accounting and Reconciliation
Best Practices Sox Controls
12
Account Reconciliation
Best Practices Sox Controls
• Establish clear ownership and accountability for each account reconciliation
• Deploy a consistent methodology and terminology for reconciling accounts
• Use of web-based tools by automating the process to match transactions and capture
reconciling transactions, age unreconciled amounts, maintain history, and continuously track
and report progress to resolve exceptions
• Establish criteria and prioritize timetables to complete reconciliations and resolve
unreconciled balances
• A reconciliation schedule/tracker is maintained to monitor the status of reconciliation
• The account reconciliation is reviewed and approved by appropriate authority
• Standard templates are used for performing the reconciliation
• Continuously measure and report progress towards resolving aged unreconciled items
• Require action plans for any unreconciled items that exceed 60 days
• Supporting documentation be attached to account reconciliation forms
13
Account Reconciliation
Best Practices Sox Controls
14
Bank reconciliation
Best Practices Sox Controls
• The bank reconciliation is done automatically by the system after uploading the bank
statements
15
Bank reconciliation
Best Practices Sox Controls
16
Reconciliation and Closing Process
Best Practices Sox Controls
• Mapping of closing process for gaining understanding of key inputs, activities and outputs
• Implement formal closing calendar with intermediate milestones – Closing Calendar to clearly
identify various activities to be completed, persons responsible for them and timeline within
which the same need to be completed
• Automate recurring entries where possible, and minimize manual processing of standard and
recurring entries
• Perform activities and entries that can be performed during the month outside of the “closing
crunch” – optimize the closing process and timeline by proper planning and scheduling
transaction processing
• Reschedule non-critical activities, re-sequence critical path activities, smooth work activities
throughout the month (eg: balances should be reconciled during the course of the month at
agreed frequency
• Track errors in the process of closing the books, analyse root causes behind repeat errors,
create error reports and design corrective processes / measures to prevent future errors
• Well defined Communication protocol for deadlines and issue resolution
• Reduce manual journal entries and then ensure journals are automated (e.g. accruals from
the purchase ledger and inventory system and automatic reversals)
• Implement materiality thresholds for adjusting journal entries
• Implement a system that automatically generates repetitive journal entries such as
depreciation and overhead allocations
17
Reconciliation and Closing Process
Best Practices Sox Controls
Control Objective Control Activity
Formal procedures exist for Formal closing timetables and task list are prepared in consultation with the Client
closing process to ensure which includes tasks to be performed, person responsible for completion, completion
that the same is completed dates. The same is updated and circulated prior to the commencement of every
on a timely basis. closing cycle.
Closing timetable is also reviewed periodically and necessary updates are made as
and when required.
Posting from Sub-Ledger to The system configuration setting ensures that sub-ledger balances are posted to the
General Ledger are made appropriate entries to General Ledger accounts, based on the mapping done at the
accurately, completely account table level. Sub-Ledger owners validate information posted from sub-ledger
and in the proper period. to general ledger for completeness and accuracy. Discrepancies noted are resolved
in a timely manner.
Accounting personnel perform daily or weekly reconciliations of sub ledger
information posted to general ledger and discrepancies observed are researched
and rectified
Accounting documents are allowed to be posted only if the document
posting date falls within either range of open periods, as defined in the system
Closing adjustments are All recurring and non-recurring closing adjustments are approved by the appropriate
approved. level of management who compare the adjustment to source documents to ensure
the documentation is adequate and sufficient.
Duties are adequately Recording, approval and review of journal entries are done by different individuals,
segregated. with different level of seniority. Incompatible functions and related duties (separate
reconciliation from the ability to approve transactions) are subject to a regular review
by management. Discrepancies and exceptions noted are promptly investigated and
corrected as necessary.
18
Consolidation and Reporting
Best Practices Sox Controls
• Formal Timetable to ensure that all reporting units close and submit their financial reporting
at period end on a timely basis
• Establish a pre-close meeting early in the closing cycle to discuss any unusual results
• Schedule each associate’s time and tasks during the closing cycle to ensure only critical
tasks are worked on during closing
• Use of Standard Reporting Format for all subsidiaries to report Financial Data
• Maintain Trackers – For tracking business units from where data needs to be received for
consolidation and the status of the same.
• Electronic Import of Information from General Ledger to Financial Reporting System –
Review of data that has been uploaded
• Well Controlled Account Mapping between consolidation system and ERP
• Up to date log of all spreadsheets used to support significant accounting entries to be
maintained stating the name of the file, its location and the user/owner.
• Spreadsheets containing sensitive data and critical formulae to be password protected to
prevent unauthorized access or manipulation or inadvertent alterations.
• Spreadsheets containing critical formulae to be reviewed to ensure there are no formulation
errors
• Use of real time reporting software and techniques for providing key stakeholders with the
latest performance data – eg. XBRL (eXtensible Business Reporting Language) allows
companies to extract specific records from disparate documents and database platforms for
compiling and redistributing data
19
Consolidation and Reporting
Best Practices Sox Controls
• Elimination of multiple feeds of information from divisions to reduce accounting re-work
• Automated and standardised consolidation and elimination entries
• Automation of conversion process – both stat to GAAP and stat to IFRS
• Formalized review procedures to ensure that an accounting period is closed after the defined
period end
• Configuration of fiscal year variant is correct
• Edit information in source systems, not in the G/L
• Perform full closing each quarter, with monthly soft closes that focus only on key
performance indicators
• Conduct an MIS review of closing cycle jobs to identify and manage bottlenecks
• Conduct formal post-mortems after each closing to document lessons learned and
improvement opportunities
• Reduce reporting cycle time by actively reducing the number of reports generated. For ex.
Report variance analysis on an exception basis, for key accounts
• Routinely survey client team on satisfaction with reporting process; Evaluate the data
required for reports jointly with client MIS team to identify ways to automate and streamline
reporting
20
Consolidation and Reporting
Best Practices Sox Controls
21
Thank you
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