A general ledger account is an accumulation of similar transactions in to one account.
A general ledger account is designed to control one or more activities.
A general ledger account may contain posting errors due to various reasons.
A general ledger provides valuable information to manage the business
A general ledger may have number of entries, but the closing balance may represent few entries/bill wise breakdown analysis
A general ledger may need to be reconciled to a statement from third party to ensure accuracy.
Bill wise breakdown, Reconciliations and Audit schedules
Therefore, every month all general ledger accounts are critically reviewed, scrutinised, reconciled to third party statement, such as bank statements, supplier /debtor statements and presented in a proper manner (audit schedules) so that there is an assurance that the figures reported in the management accounts are true, correct meaningful to make a critical decision to run the business.
Therefore, a Monthly audit file is a must which contain for each general account all the reviews/scrutiny/bill wise breakdown workings /reconciliations /results presented in the form of an audit schedule.
Monthly audit file must be reviewed by a senior accounting staff or internal audit will give the management the confidence that MIS is reliable and to make sound business decision
The external auditors requires the yearend audit file to make their opinion on the internal check and control in place during the year and this form the basis of the extent of their field work /time and this determine their audit fees.