How Audits Impact Your Approach to the Account Reconciliation Process
Due to increasingly strict and complex compliance laws, it is imperative that errors in the account reconciliation process be found well before the auditor arrives.
The increased scrutiny on finance departments began with the passage of the Sarbanes-Oxley Act (SOX) in the United States. The law states that public companies are required to report errors an auditor classifies as “material misstatements” or “material weaknesses”— unless they can prove that they found the error first.
Additionally, recent adjustments to financial regulation in Europe, as well as the United States, have largely focused on financial audits and business record checks, specifically for small and medium-sized enterprises (SMEs). Auditors are not only checking the accuracy of our financial reports, but the reporting process itself.
Account Reconciliation: The Last Test Before Audit
In the face of these new regulations, audit preparedness is essential, and is often the last chance to catch mistakes before the account reconciliation process. Consequently, reconciliation management is now critical to filter and correct errors in the accounts.
However, many businesses, especially small and medium-sized companies, struggle with time constraints on their account reconciliation process, making the audit-focus on internal controls even more challenging, if not also unreliable. Improving this process has historically required investing in more staff, new technologies, and tighter oversight of the process.
Automating the Account Reconciliation Process
Instead of trading accuracy for speed and additional FTE cost for more staff, you can automate your account reconciliation process for the best immediate and long-term results. Automation not only speeds up the process, but improves it by considering your company’s respective risk tolerances and reducing errors that manual processes, such as spreadsheets, binders and emails introduce. Additionally, as alluded to earlier, automation reduces the headcount needed to perform the reconciliation process, allowing for more focus on value-adding tasks even as your company grows.
Automation empowers financial executives with a level of accuracy and insight into the financial close process. This enables companies to meet shorter close deadlines and maintain accuracy in all mandatory financial reports.
To learn more about automation’s role in audit preparation, check out our solutions.
Written by: Ashton Mathai