Checklist - Monthly Close Process Introductuion: This document should be used as a general guide to creating a monthly financial close process checklist, however, it does not address all activities that could be assessed during this process. Controllers are encouraged to customize the checklist so that it reflects specific company practices and business operations. AREA/TASK RESPONSIBILITY DATE DUE COMPLETED REVIEWED CFO administers closing instructions on a regular basis to appropriate departments or entities. To ensure duplicate journal entries are not posted: 1. All journal entries made to the GL module are subject to the signature of the Finance Team Lead. 2. All journal entries made to the GL are assigned a unique Account Reference Number and Batch Number. Note these numbers on the journal entry form. The Finance Team Lead reviews the Trial Balance Report and ties the totals to the appropriate Balance Sheet or Income Statement Line Item. Periodically validate that the financial system blocks a journal entry if the journal entry does not balance. Periodically validate that closing journal entries are blocked from being entered into the books for previous periods. Previous periods in the financial system should be locked to prevent changes. CASH Obtain bank statements for all accounts. Perform reconciliation between bank statement and G/L for all cash accounts. Review outstanding checklist for any long outstanding checks. Determine resolution/disposition. Review all reconciling items: 1. Prepare lead schedule. Source: www.knowledgeleader.com Page 1
2. Prepare list of bank accounts and trading securities for yearend audit confirmation process. 3. Determine if any cash is considered restricted and/or a compensating balance for appropriate financial statement presentation and footnote disclosure. INVESTMENTS Evaluate all investments for proper accounting with reference to SFAS No. 115, and current accounting rules in regard to accounting for equity investments. Update Controller's investment memo on a quarterly basis. (See also, Equity Investments below.) ACCOUNTS RECEIVABLE Obtain detail of A/R balances by accounting personnel. Reconcile ending A/R balance on sub-ledger to G/L. Review all reconciling items: 1. Prepare lead schedule. ROLL-FORWARD OF ACCOUNT: Prepare roll-forward of A/R activity. COLLECTIBILITY REVIEW: Create an aged A/R detail. Show A/R in following buckets: 0-30 days, 31-60 days, 61-90 days, and 91+ days. Review long outstanding balances. Perform collectibility review of all A/R balances through discussion with relevant parties. Document results of discussion. Determine if any balances require reserves. ALLOWANCE FOR BAD DEBTS: Prepare account analysis showing bad debt allowance. Prepare roll-forward of Allowance for Bad Debts account. Tie beginning balance to G/L and to prior-period financial statement. Tie Bad Debt Expense to Income Statement. Tie write-offs to actual write-offs recorded during the period. Tie ending balance to G/L. PREPAID EXPENSES Obtain supporting documentation for all additions to Prepaid Assets during the period. Ensure amounts are properly classified as Prepaid Assets. Source: www.knowledgeleader.com Page 2
Prepare account analysis/reconciliation of Prepaid Assets account. 1. Review all asset items for proper classification of short-term vs. long-term. OTHER CURRENT ASSETS Prepare account analysis of Other Current Assets account. Prepare roll-forward of Other Current Assets activity. Review all asset items for proper classification of short-term vs. longterm. FIXED ASSETS ADDITIONS: Review new Fixed Asset purchases during period. Obtain related invoices. Ensure invoices have been approved by the responsible budget holder. Journal entries related to Fixed Asset additions are approved by the Finance Team Leader and are supported by appropriate detailed documentation. Tie additions in roll-forward to detail of purchases during period. Ensure all items added to Fixed Assets are properly capitalized. Tie non-cash acquisitions to Capital Lease or other area(s). DISPOSALS: Journal entries related to Fixed Asset disposals are approved by the Finance Team Leader and are supported by appropriate detailed documentation. Tie disposals in roll-forward to detail of assets disposed of during period. Ensure journal entries were recorded correctly to remove asset and accumulated depreciation. Determine gain or loss recognized on disposals. Update roll-forward of Fixed Asset by category. Agree to fixed assets sub-ledger. FOOTNOTE DISCLOSURE: Prepare footnote disclosure to show asset classes and related balances. Source: www.knowledgeleader.com Page 3
ACCUMULATED DEPRECIATION AND AMORTIZATION Perform monthly calculation of depreciation expense. Book related entries. Prepare roll-forward of accumulated depreciation and amortization accounts. ASSETS UNDER CAPITAL LEASE: Ensure that assets under Capital Lease are being amortized appropriately. FOOTNOTE DISCLOSURE: Prepare footnote disclosure to show accumulated depreciation balances as of period-end as well as current period depreciation expense. OTHER ASSETS Prepare reconciliation of Other Assets account. 1. Review all asset items for proper classification of short-term vs. long-term. GOODWILL SFAS No. 142 ANALYSIS: Perform annual (or more frequent, if necessary) assessment for impairment. Discuss with management as to any changes in Goodwill during period. Prepare roll-forward of Goodwill account activity. Obtain supporting documentation for changes to Goodwill during the period. Prepare lead schedule. INTANGIBLE ASSETS SFAS No. 141 ANALYSIS: Perform quarterly assessment for impairment. Prepare roll-forward of Intangible Asset account activity. Source: www.knowledgeleader.com Page 4
Obtain supporting documentation for changes to Intangible Assets during the period. Prepare lead schedule. AMORTIZATION: Perform monthly calculation of amortization expense. Book related entries. ACCOUNTS PAYABLE CUTOFF: Perform A/P cutoff Three days before period-end. Obtain A/P sub-ledger detail. Reconcile A/P sub-ledger to G/L. ACCRUED EXPENSES CUTOFF: Contact relevant process owners to request information regarding required period-end accruals. Contact vendors for outstanding/unbilled amounts as of periodend External Auditors, Legal, Consultants, Recruiting firms, etc. Prepare reconciliation of Accrued Expenses accounts. Prepare subreconciliations as necessary. Document all reconciling items. Review all liability items for proper classification of short-term vs. long-term. CAPITAL LEASE OBLIGATION SFAS No. 13 ANALYSIS: Obtain copies of all new leases entered into during period. Perform analysis using SFAS No. 13 criteria. Ensure leases are properly accounted for under SFAS No. 13 - capital vs. operating. Prepare and record journal entries to properly reflect cap lease activity. Update roll-forward schedule of Capital Lease Obligation liability. Ensure that obligations recorded relate to assets still under ownership. Source: www.knowledgeleader.com Page 5
Determine proper classification of Capital Lease Obligation as shortterm vs. long-term. Prepare lead schedule. FOOTNOTE DISCLOSURE: Prepare footnote disclosure for future commitments. OTHER CURRENT LIABILITIES Prepare roll-forward of Other Current Liabilities activity. 1. Review all items for proper classification of short-term vs. longterm. EQUITY Prepare roll-forward of Equity accounts: 1. Tie Net Income in Retained Earnings roll-forward to Income Statement. 2. Obtain support for all changes in Equity accounts. Source: www.knowledgeleader.com Page 6