Management override via journal entries

Management records entries outside the normal processes to change reported results or conceal other schemes. This is the mechanism behind most financial statement schemes and is the focus of journal entry testing under auditing standards.

Fully covered.

Starter pack: Journal entry testing

Red flags

In the data

• Entries on weekends, holidays, or after hours
• Entries by senior, IT, or rarely-posting users
• Manual entries to revenue, reserves, accruals, or cash; unusual account pairings
• Round amounts or amounts just below review thresholds
• Post-close and backdated entries; blank descriptions

Behavioral

• Domineering management; pressure on accounting staff
• Frequent disputes with auditors

Internal controls

• Senior personnel or IT staff can post entries without review
• No review of manual entries above a threshold