The process of reconciling allows us to identify posting errors, exceptions, minimize liability and identify theft or loss.
When we reconcile we acknowledge we have some idea what is happening in the books.
Reconciliation has to occur between the organization’s books and an external document.
Some process of elimination happens during the reconciliation process as data is compared between the books and the external document.
Example while reviewing deposits if an employee is misusing purchase orders, the reconciliation process should help the preparer identify this error only if he/she take the extra step to investigate why multiple vendors provided the same purchase order number. Why a purchase order is out of sequential order or possibly why the purchase order is signed by someone else besides an authorized signer — examples of what can happen in during the reconciliation process.
When reconciling it’s crucial to understand timing could be an issue.
The same rule applies with checks or any other transaction, as a part of the reconciliation process, if the preparer takes the extra step to research what may appear as discrepancies, this allows the opportunity to resolve mis-posting or fraudulent activity.
Reconciling is a means of recognizing what is happening on a set of books in a given period. Reconciling creates a summary of outstanding transactions or findings that can be resolved on a timely basis.
The reconciliation process is not complete if the reconciliation does not make sense, if reconciliation items are not addressed or if it does not zero in the end.