How to Verify the Legitimacy of Journal Entries

Journal entries are a tool accountants use to record transactions into the general ledger. Frequent transactions will require accountants to make several journal entries to document these activities. Though common in accounting, journal entries will often come under review by managers or auditors. This review process will ensure the timeliness, validity and accuracy of transactions. Auditors review journal entries to establish the legitimacy of journal entry transactions. Inappropriate entries can result in distorted financial information released to stakeholders.

Instructions

1. Print a general ledger account report. Ensure the report details the date, description and dollar amount of each journal entry.

2. Request a copy of the original paperwork used to create the journal entry. Companies should have a hard copy of all information relating to each journal entry posted in accounts.

3. Check all math calculations on the journal entry. Review the hard copy and look for any deviations from your math check.

4. Discuss the journal entry with the individual who posted it into the general ledger. Ask questions regarding the validity of the transaction.

5. Contact the vendor or other outside party involved in the journal entry transaction. Discuss the transaction with this party and determine the accuracy of all information listed on the paperwork.

6. Review the audit trail left in the computerized accounting system. These systems will document who posted the entry and adjusted the account information. This is usually an electronic document stored in the computer system.

References

• "Principles of Auditing & Other Assurance Services"; Ray Whittington, et al.; 2010