When summarizing the account activity, use the key components that represent the types of transactions flowing into the account. For example, Payroll Payable may have the following components: regular salaried full-time employees, regular hourly employees, temporary or partial period employees, reimbursements, and other. Components that make up an account may mirror the plan input, transaction sources, or areas that will aid in account analysis. It is not acceptable to simply summarize the debit and credit totals. For accounts that are reconciled for the first time, the opening balance must be reconciled.
Differences between the general ledger and subledgers or supporting documentation must be investigated and resolved in a timely, accurate manner. Recurring variances must be investigated and resolved at the root cause, as they may indicate a systemic issue.
? Out-of-balance situations may occur due to:
1. Natural timing differences
2. Misclassification (i.e., journal entry to the wrong account)
3. Miscalculation (i.e., mathematical error in determining the amount of the journal entry that was to be recorded)
4. Errors where an entry was omitted or recorded multiple times
5. Other unexplained or a combination of reasons that have not yet been identified
? Misclassifications, miscalculations, and errors of omission or duplication should be readily identified and corrected. Corrections should take place within the following month.
Any individual unreconciled differences greater than $5,000 USD occurring at quarter-end or year-end must be disclosed to the Chief Accounting Officer (CAO) (or a designate). Every effort must be made to understand and resolve such differences in the month the error occurs. If you are not sure if a difference is considered material, contact Corporate Financial Reporting to discuss and resolve the matter.
Levels of materiality are defined by the CAO and communicated. Each month the CAO receives a status of the reconciliation accounts identifying those accounts that have unreconciled values (i.e., exceed the materiality thresholds) as well as those that have long-term (level C) unexplained variances.