Balance sheet substantiation
Encyclopedia
Balance Sheet Substantiation is the accounting process conducted by business
es on a regular basis to confirm that the balances held in the primary accounting system of record
(e.g. SAP
, Oracle
, other ERP system's General Ledger) are reconciled (in balance with) with the balance and transaction records held in the same or supporting sub-systems.
Balance Sheet Substantiation includes multiple processes including reconciliation
(at a transactional or at a balance level) of the account, a process of review of the reconciliation and any pertinent supporting documentation and a formal certification
(sign-off) of the account in a predetermined form driven by corporate policy.
Balance Sheet Substantiation is an important process that is typically carried out on a monthly, quarterly and year-end basis. The results help to drive the regulatory balance sheet
reporting obligations of the organization.
Historically, Balance Sheet Substantiation has been a wholly manual process, driven by spreadsheet
s, email
and manual monitoring and reporting. In recent years software solutions have been developed to bring a level of process automation, standardization
and enhanced control to the Balance Sheet Substantiation or account certification process. These solutions are suitable for organizations with a high volume of accounts and/or personnel involved in the Balance Sheet Substantiation process and can be used to drive efficiencies, improve transparency and help to reduce risk.
Balance Sheet Substantiation is a key control process in the SOX 404 top-down risk assessment
.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
es on a regular basis to confirm that the balances held in the primary accounting system of record
System of record
A system of record is an information storage system , which is the authoritative data source for a given data element or piece of information...
(e.g. SAP
SAP ERP
The SAP ERP application is an integrated enterprise resource planning software manufactured by SAP AG that targets business software requirements of midsize and large organizations in all industries and sectors...
, Oracle
Oracle Database
The Oracle Database is an object-relational database management system produced and marketed by Oracle Corporation....
, other ERP system's General Ledger) are reconciled (in balance with) with the balance and transaction records held in the same or supporting sub-systems.
Balance Sheet Substantiation includes multiple processes including reconciliation
Reconciliation
Reconciliation may variously refer to:* Bank reconciliation* Truth and reconciliation commission-Religion:* Sacrament of Penance , also known as Reconciliation...
(at a transactional or at a balance level) of the account, a process of review of the reconciliation and any pertinent supporting documentation and a formal certification
Certification
Certification refers to the confirmation of certain characteristics of an object, person, or organization. This confirmation is often, but not always, provided by some form of external review, education, assessment, or audit...
(sign-off) of the account in a predetermined form driven by corporate policy.
Balance Sheet Substantiation is an important process that is typically carried out on a monthly, quarterly and year-end basis. The results help to drive the regulatory balance sheet
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...
reporting obligations of the organization.
Historically, Balance Sheet Substantiation has been a wholly manual process, driven by spreadsheet
Spreadsheet
A spreadsheet is a computer application that simulates a paper accounting worksheet. It displays multiple cells usually in a two-dimensional matrix or grid consisting of rows and columns. Each cell contains alphanumeric text, numeric values or formulas...
s, email
Email
Electronic mail, commonly known as email or e-mail, is a method of exchanging digital messages from an author to one or more recipients. Modern email operates across the Internet or other computer networks. Some early email systems required that the author and the recipient both be online at the...
and manual monitoring and reporting. In recent years software solutions have been developed to bring a level of process automation, standardization
Standardization
Standardization is the process of developing and implementing technical standards.The goals of standardization can be to help with independence of single suppliers , compatibility, interoperability, safety, repeatability, or quality....
and enhanced control to the Balance Sheet Substantiation or account certification process. These solutions are suitable for organizations with a high volume of accounts and/or personnel involved in the Balance Sheet Substantiation process and can be used to drive efficiencies, improve transparency and help to reduce risk.
Balance Sheet Substantiation is a key control process in the SOX 404 top-down risk assessment
SOX 404 top-down risk assessment
In financial auditing of public companies in the United States, SOX 404 top-down risk assessment is a financial risk assessment performed to comply with Section 404 of the Sarbanes-Oxley Act of 2002 . The term is used by the U.S. Public Company Accounting Oversight Board and the Securities and...
.