Journal Entry Testing

IT has rapidly penetrated the accounting-relevant main and sub-systems. This has led to an increasing number of individual data records. Due to this multitude of available booking data, it is becoming increasingly difficult in practice to base audits on a solid risk analysis and to identify individual critical issues. Journal Entry Tests (JETs) are used to purposefully and promptly analyze transaction data and the associated accounting data. The goal is to identify unusual journal entries and uncover their impact on the annual financial statements. This increasingly includes the integration of data from sub-systems or subsidiary ledgers. In practice, the execution and documentation of JETs is fundamentally carried out according to a uniform procedure, despite the heterogeneous financial accounting systems. From this, initial insights can be gained regarding where to set audit priorities and where further analytical audit actions should be purposefully undertaken. For this purpose, the seven W-questions (Who, What, Where, When, How, Why, Where from) are routinely asked. The book provides a systematic introduction to the execution and interpretation of JETs within the framework of the annual financial statement audit, explains the fundamental approach based on a phase model, discusses the audit assertions underlying each JET, elaborates on the data fields required for the test, and includes numerous practical examples that make the individual steps directly comprehensible.