Vous êtes sur la page 1sur 3

Accrued Expenses Narrative

The Company starts the accrual process by tying the prior-month balance to the general ledger. There are four different sections related to accruals: Open Purchase Orders On Top Accruals by vendor Legal Estimate Accruals T&E Expenses Quarterly Meeting of Department Heads Monthly Reconciliation

Open Purchase Orders The Accounting Manager reviews the prior months accrued expense, and an open Purchase Order (PO) report is prepared by the Accounts Payable Assistant. The open PO report shows two months of PO activity of items received with no invoice received. Per discussion with the Accounting Manager, since the turnaround for an open PO is usually about 45 days, the Company uses a two month open PO report to cover that time frame. The open PO report is reviewed by the Accounting Manager. The Accounting Manager reaches out to the PO originator to determine if goods and services have actually been received and need to be accrued. Once confirmed, an accrual journal entry is recorded in the system by the Senior Accountant and reviewed by the Accounting Manager. The Assistant Controller also reviews the report to confirm if all POs are up to date. (R_PAO2_3 | C_PAO2_3) On Top Accruals by Vendor The Accounts Payable Assistant downloads the latest six months of AP activity and runs a pivot table by vendor by month. He or she reviews the activity and makes notations in a comment section as to what the accrual per vendor should be based on the activity, and comparison to what is recorded in the GL. He or she provides this to the Senior Accountant and Accounting Manager, who look into each vendor situation and determine if Accounts Payable Assistants suggested accrual is appropriate. Invoices are accrued for based on the prior month. When an invoice varies every month, they take the average of the last two months and use that amount. These On Top Accrual entries are recorded in the system by the Senior Accountant and reviewed by the Accounting Manager. (R_PAO2_3 | C_PAO2_3) Legal Estimates Accrual

Note: This document is an illustrative example and is for information and education purposes only. It is not a substitute for professional advice, services, nor an entitys own internal control procedures and should not be used or relied on as such.

Accruals for legal vendors are based upon communication from General Counsel, Legal Department. General Counsel reaches out to each external legal firm providing services on a monthly basis to get an idea of what they are working on and what expected billing for the month would be. General Counsel revises the comments as necessary and fills in the suggested accrual amount for each vendor. Based on the suggested accrual column, a JE is prepared by the Senior Accountant in the system. These JEs are then sent to Accounting Manager with the revised spreadsheets attached for his review and approval. Accounting Manager reviews the spreadsheet for mathematical accuracy and discusses any questions he may have with General Counsel, Legal Department. As part of Accounting Managers review, he or she also ties the amounts to the underlying support (i.e., Legal analysis of the current months expenses) (R_PAO2_3 | C_PAO2_3). T&E Expenses The T&E Expenses are submitted by all employees in the XYZ system. For T&E entries, the Senior Assistant, General Services downloads the Open Air T&E report that shows T&E submitted, and not yet approved. After the deadline to enter T&E has passed, the Senior Assistant identifies the top ten employees who travel significantly and regularly incur the most T&E expenses to determine whether follow up with employees is necessary. Senior Assistant performs the analysis by downloading a report from XYZ system showing the top ten employees' total T&E expense submissions during the current and previous quarters. Senior Assistant then compares the current amount to previous trends and calculates the variance. If the current period expenses are significantly less than trends or she believes that there may be missing expenses, Senior Assistant performs follow up procedures to verify whether the expenses entered in XYZ system are complete. Per discussions with the Senior Assistant, General Services and Accounting Manager, the company does not have a formal threshold for investigation of variances, but Senior Accountant usually investigates variances in excess of $1,000 USD. The verification procedures include (1) emailing or calling the employee to inquire whether there are additional expenses that haven't been submitted and should be accrued and (2) reviewing the submissions to assess whether there are incomplete submission periods. After all significant variances are investigated for completeness of T&E submissions; the Senior Assistant prepares the T&E accrual for all employees. The Senior Assistant runs a report in XYZ system to filter all expenses whereby the T&E submission status is "Saved, Submitted, Approving, or Approved," effectively excluding reimbursed expenses. Based on the report and results of her follow up procedures, the Senior Assistant prepares the T&E accrual journal entry. This entry is then submitted to the Accounting Manager for review and approval; as part of his or her review, the Accounting Manager agrees the T&E accrual entry to the underlying support to verify that the accrual properly and accurately captured all submitted but not yet reimbursed expenses. (R_PAO2_3 | C_PAO2_3) Quarterly Meeting of Department Heads A quarterly meeting is held with Accounting Manager, Assistant Controller, Corporate IT Manager, Senior Assistant from General Services and General Counsel from Legal. The meeting is held to discuss new leases, legal liabilities, new office equipment, or significant or unusual transactions that took place,
Note: This document is an illustrative example and is for information and education purposes only. It is not a substitute for professional advice, services, nor an entitys own internal control procedures and should not be used or relied on as such.

and any other items that should be brought to Finances attention when closing the books . Controller also reviews accruals on a quarterly basis. He obtains the related JEs and spreadsheets after Accounting Managers detailed review and checks that all items he is aware of are properly included in the analysis. (R_PAO2_1, R_PAO2_2, R_PAO2_6, R_PAO2_5, C_PAO2_1, C_PAO2_2). Monthly Reconciliations The Finance Senior Assistant also prepares Accrued Expenses reconciliations on a monthly basis. The reconciliation is reviewed by the Accounting Manager and maintained in a monthly reconciliation binder. (R_PAO2_4 | C_PAO2_4) On a quarterly basis, the binder is reviewed by the Assistant Controller. The Assistant Controller also reviews the financial statements and ensures accrued expenses are accurately classified (R_PDI_18 | C_PDI_11). IPE: PAO2_IPE_1 Open PO Reports PAO2_IPE_2 On Top Accrual Spreadsheet PAO2_IPE_3 T&E Report 1 PAO2_IPE_4 T&E Report 2

Formatted: Font color: Auto

Note: This document is an illustrative example and is for information and education purposes only. It is not a substitute for professional advice, services, nor an entitys own internal control procedures and should not be used or relied on as such.