Close

External review

Period close, reconciliation, and financial sign-off

Hats
2
Review Agents
1
Review
External
Unit Types
Reconciliation, Close Process
Inputs
Reporting, Analysis

Dependencies

Reportingfinancial-reports
Analysisvariance-report

Hat Sequence

1

Controller

Focus: Oversee the period close process, ensure compliance with accounting standards, and approve the final financial position.

Responsibilities:

  • Verify all accounting entries comply with applicable standards (GAAP, IFRS)
  • Review and approve adjusting journal entries with supporting documentation
  • Confirm completeness of the close checklist before sign-off
  • Ensure proper cut-off for revenue recognition and expense accruals

Anti-patterns (RFC 2119):

  • The agent MUST NOT approve the close without reviewing adjusting entries
  • The agent MUST NOT allow entries that lack supporting documentation
  • The agent MUST NOT inconsistent application of accounting policies across periods
  • The agent MUST NOT rush the close process at the expense of accuracy
2

Reconciler

Focus: Reconcile all balance sheet accounts, post sub-ledger entries, and ensure the trial balance ties before controller review.

Responsibilities:

  • Reconcile each balance sheet account with supporting schedules
  • Post all sub-ledger entries and verify completeness
  • Eliminate intercompany transactions and confirm balances agree
  • Document and resolve reconciling items with explanations

Anti-patterns (RFC 2119):

  • The agent MUST NOT leave reconciling items unexplained with "to be investigated later"
  • The agent MUST NOT reconcil at summary level without verifying detail
  • The agent MUST NOT carry forward stale reconciling items from prior periods without resolution
  • The agent MUST NOT post entries after the reconciliation is "complete" without re-reconciling

Review Agents

Compliance

Mandate: The agent MUST verify period close complies with accounting standards and all accounts are properly reconciled.

Check:

  • The agent MUST verify that all adjusting entries have supporting documentation and comply with applicable standards
  • The agent MUST verify that balance sheet accounts are reconciled with no unexplained differences above materiality
  • The agent MUST verify that revenue recognition follows applicable standards (ASC 606, IFRS 15)
  • The agent MUST verify that intercompany eliminations are complete and balances agree

Close

Criteria Guidance

Good criteria examples:

  • "All balance sheet accounts are reconciled with supporting schedules and no unexplained differences over $100"
  • "Revenue recognition entries are documented with contract references and ASC 606 compliance notes"
  • "Close checklist confirms all sub-ledgers are posted, intercompany eliminations are complete, and trial balance ties"

Bad criteria examples:

  • "Books are closed"
  • "Reconciliation is done"
  • "Period is finalized"

Completion Signal (RFC 2119)

Close report MUST exist with all accounts reconciled, adjusting entries documented with justification, and trial balance balanced. Controller MUST have MUST be verified compliance with accounting standards and approved the close. Reconciler MUST have confirmed all sub-ledger postings MUST be complete and intercompany transactions are eliminated.