Month-end close Updated November 2026

Reconciliation controls

Good reconciliation controls mean the person reconciling the bank account does not also receive cash, approve payments or post journals (segregation of duties), the bank statement is obtained directly from the bank, the reconciliation is completed within days of month-end, a second person reviews and signs it, and every reconciling item is aged and cleared.

Syntax

Prepare (no cash duties) -> Independent review and sign-off -> Items aged -> Exceptions escalated -> Evidence retained

Part	What it is
`Segregation of duties`	Reconciler separate from cash handling, payment approval and journal posting
`Independent source`	Statements from the bank portal, not from the person who posts cash
`Timeliness`	Completed within a set number of days after month-end
`Review`	Reviewer checks support, math, aging; signs and dates
`Aging of items`	Reconciling items older than a threshold are escalated

Examples

A one-person bookkeeping function receives cash, posts it and reconciles the bank

Result: Compensating control: the owner reviews the bank statement and the reconciliation monthly and signs both.

Reconciliation shows an outstanding check to an unknown payee for 2,400, three months old

Result: The aging rule flags it; review finds the check was altered. Early detection limits the loss.

Policy: bank recs due by day 3, reviewed by day 5, items over 60 days escalated

Result: A simple, testable control an auditor can verify from the sign-off dates.

Common mistakes

Preparer and reviewer are the same person: the review is not independent and most frauds exploit exactly this.
Reconciling from a statement emailed by the preparer: fake statements are easy; pull it from the bank portal.
Accepting a reconciliation with a plug: an unexplained difference is an exception to escalate, not a finished reconciliation.

Practice Reconciliation controls

These drills check your answer on live data, free, no account needed.

The full workoutClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.

Questions

Why is segregation of duties important for bank reconciliation?

Someone who can both move cash and reconcile can hide the movement. Splitting the roles means a theft needs two people to collude.

What does an auditor look for in a bank reconciliation?

That it was prepared on time, reviewed, agrees to the statement and ledger, that outstanding items are genuine and cleared after period end, and that nothing was plugged.

Balance sheet reconciliationA balance sheet reconciliation supports each ledger balance with independent evidence: a bank statement, an aging, a schedule or a roll-forward. Sign-off.
Suspense accountA suspense account temporarily holds entries whose correct account is unknown, such as an unidentified bank receipt. Post, investigate, clear before close.
Month-end close checklistA month-end close checklist in sequence: cutoff, bank and card reconciliations, AR and AP, accruals and prepaids, fixed assets, balance sheet recs, lock.
Stale checksA stale check has been outstanding past the bank's honoring period, often six months. How to confirm it, void it, restore cash and the liability, escheat.