Account and object code monitoring is the process of periodically assessing an account balance or object code for reasonableness and investigating underlying accounting activity for any unexpected results. The process should be used for all accounts and object codes, particularly those not reconciled on a regular basis. Monitoring is not as involved as the account reconciliation process. For more informaiton on this activity, see Monitoring Operating Activity on the Accounting website.
The process of account and object code monitoring ensures that financial information is consistent with unit management’s expectations and allows for prompt identification of potential errors in financial reporting.
Key Concepts and Control Examples
Verify Financial Information is Complete, Accurate, and Valid:
A good internal control system provides a mechanism to verify that all transactions and account balances have been appropriately captured in financial reporting and that the activity is valid and has been recorded accurately and classified within the correct accounts.
Generate periodic (monthly, quarterly, or annual) balance sheet reports for assets and liabilities or account statements, and perform the following tasks:
- Compare the account or object code balance to a prior period to assess whether it appears reasonable based on past experience or recent changes in circumstances (e.g., stock market decline affecting the value of investments, new building investments, etc.). Investigate any unusual or unexpected balances.
- Identify and investigate any unnatural account or object code balances (assets with a credit balance or liabilities with a debit balance). These balances are presented as negative balances in the Kuali Financial System (KFS).
- Identify and investigate any balance sheet object code balances that remain unchanged from the prior period.
For revenue and expense object codes, generate periodic (monthly, quarterly, or annual) account activity statements and perform the following:
- Visually scan the activity to see if it appears reasonable and allowable, based on the purpose of the account/object code.
- Analytically review the activity for unusual items, outliers, or unexpected ending balances (e.g. expense accounts with credit balance or revenue accounts with a debit balance)
- Compare to budgeted amounts and prior-period activity, and investigate any balances that remain unchanged or that unexpectedly changed significantly.
- Investigate significant or unexpected items or variances, based on the account's purpose, past experience, or recent changes in circumstances (e.g., changes in business activities or funding, salary changes, etc.).
- Process any necessary corrections promptly.