how to validate the reliability and accuracy of information

His work has appeared in various publications and he has performed financial editing at a Wall Street firm. University of Texas, El Paso, Department of Accounting Review of the Accounting Process - The Basic Model Sid Glandonīased in Ottawa, Canada, Chirantan Basu has been writing since 1995.NYU Stern School of Business A Primer on Financial Statements Aswath Damodaran.A high sales return amount may indicate a quality control problem in your manufacturing facility or in your supplier's facility.

For example, a higher-than-normal inventory balance might be the result of too many obsolete or discontinued items in stock. The difference in the net cash balance between the previous and current periods should match the change in your bank statements, assuming that loan proceeds go through your business's bank accounts.įollow up with your bookkeeper, store manager or the warehouse supervisor if you spot anomalies. Verify that you have made adjustments for non-cash expenses in the statement of cash flows. Verify that you have made the adjusting entries for accrued but unpaid expenses, such as interest expense and salaries expense. If you have fixed assets, there should be an entry for depreciation expenses.

Cost of goods sold should not be the same each month, because your sales composition is likely to vary each month. Review the income statement for possible errors. In a guidance note published on its website, the Illinois Small Business Development Center at Illinois State University recommends that small-business owners look for obvious errors on the balance sheet, such as a negative cash balance. Similarly, the long-term liability balance should match the total balances on mortgage and other long-term loan documents.Ĭheck for obvious balance-sheet errors. For example, the cash balance on your balance sheet should match the ending balance on your bank statement. Reconcile your accounting records with external records, such as bank statements, supplier invoices, credit card statements and other documents. In a November 2010 'Northern Nevada Business Weekly' article, certified public accountant Mike Bosma recommends that you provide the data entry clerks with a printed chart of the company's accounts to use as reference so they enter the data in the correct accounts. Training and random monitoring are two ways to ensure quality control in the data-entry process. If your data entry professionals are making math errors or entering the data in the wrong accounts, even a sophisticated accounting package will not detect it. Ensure the accuracy of the data entry process, which involves journal entries of financial transactions and the posting of journal entries to the ledger.

How to validate the reliability and accuracy of information