Purpose
Evaluate a submitted balance sheet reconciliation the way a reviewing accountant would — checking that the GL balance ties, reconciling items are supported and current, coding is correct, and no GAAP red flags are hiding in the detail — then deliver a clear approve/return decision with specific issues and follow-up questions. Eliminates the risk of rubber-stamping reconciliations that mask misstatements, stale items, or improper cutoff.
When to Use
Invoke this skill when the user asks to:
- Review or approve a preparer's account reconciliation during close
- Check a balance sheet reconciliation for completeness and accuracy
- Identify red flags or unsupported reconciling items in an account
- Triage a reconciliation with a large or aging unreconciled difference
- Prepare review notes or follow-up questions to send back to a preparer
- Validate that a reconciliation is GAAP-aligned before sign-off
Inputs Required
Before starting, collect:
- Account type: What is being reconciled (e.g., cash, AR, AP, prepaid, accrued liabilities, fixed assets, intercompany, suspense)
- GL balance: The general ledger ending balance for the period being closed
- Supporting balance: The independent source total (bank statement, subledger, amortization schedule, third-party statement)
- Reconciling items: The list of items bridging GL to support — description, amount, date, and coding if available
- Period: The close period (month/quarter/year) and prior period balance if available
- Preparer and date: Who prepared it and when (for aging and sign-off checks)
- Materiality threshold: The dollar or percentage threshold below which differences are acceptable (if provided)
If materiality is not provided, apply a working threshold of the lesser of $1,000 or 1% of the account balance and state the assumption. If reconciling item dates are missing, flag aging as unverifiable rather than assuming items are current.
Instructions
Step 1: Verify the Reconciliation Balances
Confirm the arithmetic before evaluating anything else.
- Compute: GL balance − reconciling items = supporting balance (or the account's stated reconciliation logic)
- If it does not tie, calculate the exact unreconciled difference and flag as a blocking issue — no reconciliation with an unexplained difference above materiality can be approved
- Confirm each reconciling item's sign (does adding it move the balance the right direction?)
- Recompute any subtotals; do not trust the preparer's math
Step 2: Assess Completeness
Check that the reconciliation is a real reconciliation, not a restatement of the GL balance.
- Every reconciling item must have a description, amount, and date — items with amount only are unsupported
- Confirm support is referenced or attached for each material item (invoice, deposit slip, schedule line, journal entry number)
- Verify the supporting balance is from an independent source — a subledger the preparer controls is weaker support than a bank or third-party statement
- Confirm the reconciliation carries a preparer name and date; unsigned or undated reconciliations fail completeness
Step 3: Evaluate Coding Accuracy
Check that reconciling items and adjustments are coded correctly under US GAAP.
- Account classification: Do reconciling items belong in this account? (e.g., a vendor prepayment sitting in AP, a fixed asset expensed to repairs)
- Period/cutoff: Are items recorded in the correct period? Look for invoices dated in the period recorded in the next, or accruals that should have reversed
- Current vs. non-current: For balance sheet items, is the classification correct (e.g., current portion of long-term items)?
- Debit/credit direction: Does a reconciling item's normal balance match the account's normal balance? Contra-normal items warrant explanation
Step 4: Age the Reconciling Items
Stale items are the most common signal of an unaddressed problem.
- Classify each open reconciling item: 0–30 days / 31–60 / 61–90 / 90+ days
- Flag any item over 90 days old — these often indicate a lost transaction, a duplicate, or an entry that should have been written off
- Flag items carried from prior period unchanged — a reconciling item that never clears is a red flag, not a rollforward
- For clearing/suspense accounts, any aged balance is a finding by default
Step 5: Scan for GAAP Red Flags
Look for patterns that indicate misstatement risk beyond individual items.
- Round-dollar reconciling items (e.g., exactly $5,000): often plugs or estimates, not real transactions
- A single large "difference" or "plug" item with a vague description ("timing", "misc", "to balance"): a plug is a failed reconciliation
- Unusual period-over-period swings: balance moved materially with no corresponding reconciling activity
- Debit balance in a normally-credit account (or vice versa): possible misclassification or negative subledger
- Reconciling items that net to near-zero: may indicate an unreversed accrual paired with its correction
- Deferred/prepaid amortization not tracking to a schedule: check the balance against expected straight-line runoff
Step 6: Render Decision and Follow-Up
Produce a single clear determination:
- APPROVED — ties within materiality, complete, correctly coded, no aged or red-flag items
- APPROVED WITH NOTES — acceptable but with items requiring monitoring next period
- RETURNED TO PREPARER — has blocking issues (doesn't tie, unsupported material items, aged items, or GAAP red flags)
For any returned or noted reconciliation, write specific follow-up questions the preparer can act on — each tied to a named item, not a generic request.
Output Format
- Structure: Determination banner at top, then diagnostic sections in review order, then a prioritized issue list and preparer questions
- Length: 500–900 words depending on issue volume
- Format: Structured document with a short balance-verification table and categorized issue lists; not prose-heavy
- Sections: Determination → Balance Verification → Completeness → Coding → Aging → Red Flags → Issues (ranked by severity) → Follow-Up Questions for Preparer
- Tone: Reviewing accounting manager — precise, evidence-based, non-accusatory but firm on blocking issues
Quality Checklist
Before delivering output, verify:
- [ ] The reconciliation math was independently recomputed and the tie-out (or exact difference) is stated
- [ ] Every reconciling item was aged, or aging was explicitly flagged as unverifiable where dates are missing
- [ ] A single determination is rendered (APPROVED / APPROVED WITH NOTES / RETURNED) — no hedging
- [ ] Each issue names the specific item or amount it refers to — no generic findings
- [ ] The materiality threshold used is stated (provided or assumed)
- [ ] Every returned/noted issue has a corresponding actionable preparer question
Notes
- A reconciliation that ties perfectly with a large round-dollar plug is worse than one with a small honest difference — the plug hides a real problem
- Aged items over 90 days are the single most reliable predictor of a misstatement; escalate any account where they persist across periods
- Clearing, suspense, and intercompany accounts should be held to a stricter standard — their target balance is typically zero, so any residual is a finding
- When support is a subledger the preparer maintains, note the reduced assurance and recommend an independent source where one exists
How to use this skill
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