Question

In: Accounting

During month-end close the Controller or Accounting Manager instructs you to make a Journal Entry with...

During month-end close the Controller or Accounting Manager instructs you to make a Journal Entry with no Supporting (Backup) Documentation or less than appropriate Supporting (Backup) Documentation.

1)     Would you make the Journal Entry? Why or Why not?

2)     Is it important to have proper documentation supporting Journal Entries? Why or Why not?

3)     How would you handle this with the Controller or Accounting Manager?

Contextual Note: This scenario can arise due to ignorance on behalf of the Controller or Accounting Manager, but I would not rule out a desire to manipulate the books.

Solutions

Expert Solution

1) While posting any journals for any amount, you must have a backup as it is the only proof that the journal being posted is correct and there is no wrong-doing or manipulation of books is involved. Hence, without backup, I will not post the journal.

2) Yes. It is quite important to have proper documentation as a backup of journal being posted. This document ensures that the cost or revenue in journal being posted has actually incurred/received and there is no manipulation involved.

3) In such a scenario, when controller or accounts manager asks me to post any journal without a proper backup, I would first of all not agree to post the journal & request the controller/accounts manager to provide proper back-up. In case he does not agree to provide me the back-up and insists on posting the journal, I would ask him to communicate the same over an email using his official email ID, so that his ask is documented. I would use this as a backup for that journal. If he denies that as well, I would simply not post the journal and take the issue to the higher management.

ekkarill92 answered 1 year ago
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