Record to report / R2R – General Accounting – JE
We listed the steps in a JE or a Journal Entry process.
The criticality of this process comes from the fact that quite often, journals are used to bypass the normal accounting entries, or to pass rectification entries. This does not really stem from the modern day accounting / ERP systems. This comes from standard accounting processes.
I remember one instance, dates back to 1988, where we detected a fraud done by an accountant using JEs. He showed payments as advances to employees and used JEs to wipe these balances off into customer discount accounts. In a span of 6 months, he siphoned off a sum of about Rs. 200,000, which was a big amount (Approx $7,000 in those days).
The critical component of a JE process is that proper approvals must be in place before a journal entry is passed. It sometimes becomes quite a task, as the CFO’s organization build rules for approvals, based more on controls rather than functionality or delegation. At the appropriate deadline, if the approver is travelling, getting an approval becomes a challenge. You may be wondering why I picked up this example. To be honest, we have seen this happen so often that we could not resist quoting this.
Pro-activeness is the only solution, both at your end and you may need to define and plan proper cut-offs with the accounting department of your client / principal.
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