What to check on the Trial Balance and the General Ledger

1. 1
1 Risk & Control Department
Current assets/ current liabilities
• Current assets/ Current liabilities
• Decrease: Asset misappropriation?
• Increase: Concealed liabilities?
• Even if we spent a lot of money, we did not earn more money. Therefore, we have lost
some money somewhere, for example:
• We have maybe invoiced at prices below the referenced prices
• We have maybe modified the inventory
First year
Current assets Current liabilities
Cash/ bank 45 000,00 €
Debtors 150 000,00 €
Inventory 75 000,00 € Creditors 95 000,00 €
270 000,00 € 95 000,00 €
Second year
Current assets Current liabilities
Cash/ bank 15 000,00 €
Debtors 200 000,00 €
Inventory 150 000,00 € Creditors 215 000,00 €
365 000,00 € 215 000,00 €
1st year 2nd year
Ratio: current assets/ current liabilities 2,84 1,70

2. 2
2 Risk & Control Department
Receivables turnover
• Receivables turnover (comparison between debtors and profit).
• (efficiency– collections)
• Decrease: Fictious sales (that have not been paid) ?
• In this example, there are less debtors with regards to profit. Therefore, it appears that
the accounts receivable service has improved the efficiency of collections.
First year
Net sales 250 000,00 € Average net receivables 155 000,00 €
Second year
Net sales 450 000,00 € Average net receivables 210 000,00 €
1st year 2nd year
Ratio : receivables turnover 1,61 2,14

3. 3
3 Risk & Control Department
Profit margin
• Profit margin
• (profit per dollar of sales)
• Decrease: Fictitious costs: phony vendors, inflated expenses,
ghost employees ?
• Increase: Fictitious sales?
• There was less net sales per dollar of sales
• The inventory has maybe been modified,
• Fictitious consulting services have maybe been given.
Première année
Net income 15 000,00 € Net sales 250 000,00 €
Deuxième année
Net income -25 000,00 € Net sales 450 000,00 €
1st year 2nd year
Net income/ net sales 0,06 -0,06

4. 4
4 Risk & Control Department
Zero balances
Negative cost
balance
Positive
revenue
balance
Positive
liabilities
balance
Negative
assets
balance
Unexplained
large variance
year-on-year
High value of
movements/
balance for risky
accounts (bad-
debt)
High value debit
movements on
revenue
(cancellations)?
High value
credit
movements
expenditure
(cancellations)?
Year-on-year
changes to
ratios
Benchmark
ratios similar
entities
Trial balance – things to look for

5. 5
5 Risk & Control Department
Balance sheet accounts
We tend to analyse the balance
P&L accounts
We tend to analyse the movements
Why?
Because balance sheet accounts are have open item management, meaning that they are cleared. For example, a customer
invoice is debited to the customer control account and a customer incoming payment is credited to the customer control
account. What we tend to be interested in in balance sheet accounts, is where we have outstanding balances (for example
outstanding debit on the customer control account), or where the account is “out of balance”, perhaps because a customer did
not reimburse a credit note and then the account becomes negative rather than the expected debtor balance.
Because P&L accounts do not have open item management, meaning that we usually post all expenditure on debit and all
revenues on credit. What we tend to be interested in, is where we see the opposite, for example revenues on debit, because
this could indicate cancellations of revenue, for example, cancellation after closing of previously entered fictitious invoices.
Trial balance – quick tips

6. 6
6 Risk & Control Department
Trial Balance checklist
# Description Reason
1 Check that debit = credit Ensure that the data is
coherent
2 Check that assets = liabilities
+ retained earnings
Ensure that the data is
coherent
3 Identify accounts that are
new in this FY
Fictitious GL accounts for
hiding miss-statements
4 Check the current assets/
current liabilities ratio year-
on-year (see next page)
Decrease: asset miss-
appropriation?
Increase: Concealed liabilities?
5 Check the receivables ratio
year-on-year
Decrease: fictious sales?
Increase: More efficient AR?
6 Check the profit margin year-
on-year
Decrease: fictitious costs?
Increase: Fictious sales?
7 Identify accounts not used in
FY-1
Fictious GL account to hide
misstatement?
8 Increase in postings to
suspense accounts year-on-
year?
Cookie-jar / fictitious cost or
revenue?
9 New cost/ profit center Hiding fictitious cost/ profit?

7. 7
7 Risk & Control Department
Journal entry checklist
# Description Reason
1 High percentage manual Material misstatements
2 Manual journal entries
entered by top management
Miss-statements
3 High-value adjustments
entered by top management
at year end (filter on
document type)
Miss-statements
4 High value / repeated credit/
debit memos, especially after
closing
Fictitious sales or purchasing
that is then cancelled
5 Unusual “Z” document types Unusual postings used to hide
misstatements/ misuse of SAP
6 Document types for
interfaces such as T&E: check
volume over time
High-values T&E used for gifts/
bribes
7 Document types for cash/
checks
Cash/ checks used for gifts/
bribes
8 Accounts that are not
mapped to Tango
Hiding of misstatements on
accounts that are not
consolidated
# Description Reason
9 Users that rarely enter JEs,
but enter JEs of a high value
Misstatements, usurpation
user access to hide
misstatement
10 Users that are not members
of the accounts department
(FI postings only)
Fictitious journal entries
entered by operational staff in
order to hide fictitious
customer/ supplier invoices,
etc.