For example, sub ledgers needed to be reconciled to the general ledger. Because, when it comes to the financial close, the term reconciliation is typically used in reference to substantiation. When it comes to the balance sheet, companies are required to substantiate their results as of a point in time, typically at month-end or quarter-end.
Substantiation involves multiple processes including reconciliation to underlying systems, as well as validation of the completeness and accuracy of the ending balance which involves more than simply agreeing information within the ERP. Substantiation is the confirmation that an ending balance is appropriate, and more often than not, it requires corroborating information in the general ledger with supporting documentation from outside of the general ledger such as invoices, contracts, or schedules.
Auditors rely heavily on balance sheet substantiation activities to support their activities and opinion. In addition, certification and approval of substantiated account balances satisfies key control considerations under the US Sarbanes Oxley regulations, SOX They struggle with the manual workload at month-end and the painful audit processes that follow.
Quality, consistency, and visibility to errors are other common concerns. SAP Account Reconciliation and Automation by BlackLine helps automate this end to end process by providing configurable rules, auto-certification and checks. It provides assurance to accountants with workflow guidance, transparent tasks and balance thresholds. Finally, it provides security with sign-offs and integrated documentation to effectively prepare for audit which is also streamlined with this solution.
A balance sheet substantiation template has been made available for users to reference and use during this process. The balance sheet substantiation template breaks out the most common non-system generated balances that need substantiation. Included in this template are examples of substantiation that the UCO deems acceptable for the most common non-system generated balances.
This substantiation support should be placed in the same Excel file as the balance sheet as shown in the example below such that all information is kept in one place. Campuses may have additional requirements and submission deadlines in place.
Verify submission guidelines with the specific campus office and fiscal officer. In addition to the template available in the Reference Materials Library, this section will present examples of the most common non-system generated balances that need substantiation along with the UCO approved substantiation, calculations and additional support for those balances. For any additional questions, contact the campus office or the Accounting and Reporting Services team at uars iu.
An Excel spreadsheet with columns indicating the date, cash sales, credit card sales, and total as shown below is the recommended substantiation for Cash in Transit. The total should account for the object code balance. Accounts receivable substantiation should always provide a list of the invoices that comprise the receivable balance.
An Excel spreadsheet or listing indicating the customer name, amount and date of service as highlighted below. Allowance for Bad Debt substantiation should always provide an Excel spreadsheet showing the Bad Debt Allowance percentage and Actual Write-off calculation. For the balance ending June 30th, the current year write-off percentage would be calculated by finding the average of the prior 3 years write-off percentages as shown below.
To get the dollar amount, multiply the new write-off percentage by the total credit sales for the current fiscal year. Organizations that carry inventory must state in their support the date of the last physical count. When an inventory count is conducted, an inventory schedule listing the part number if available , item description, units on hand, average cost per unit and total value should be submitted.
Otherwise, please provide the last page of the inventory report showing totals from the sub-system. Entire inventory reports should be available upon request. The Balance sheet reconciliation procedure and actions are involved:. Responsibility and sign off. Responsible Account Owner is responsible to prepare the reconciliation and must be physically signed off. The actual preparation of the reconciliation is delegated to the staff but the responsibility cannot be delegated.
The following actions must be taken place before sign off the reconciliation:. Full analysis is performed and explanations of issues have been documented. Ensure the issue items are escalated in accordance with stated procedures. Account level reconciliation.
The staff must reconcile the balance sheet items down to the most detailed level. Reconciliations are to be performed at the lowest level of detail. Ensure reconciliation is performed for every account with a balance at the month end. Frequency of reconciliations.
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