Target percentages: Risk ranking
Leveraging insight from hundreds of organizational interactions, here are the target percentages of your accounts that should fall within low, medium, and high-risk categories.
High risk attributes
Risk to financial statements
Significant work to reconcile, posing a material misstatement risk to the balance sheet
Considerations
- Balance is consistently significant to the balance sheet (materiality)
- High volume or unusual transactions
- Highly judgmental (valuation allowances, significant accruals)
- Aged items
- Multiple systems interfacing to the general ledger (GL)
- High volume manual journal entries and multiple teams/processes using GL Account
- System interface is reliant on manual processes for proper classification
Types of accounts
Cash, accounts payable, accounts receivable
Frequency
Monthly
Preparer due date
End of period
Approver due date
End of period
Target % of accounts
10%
Medium risk attributes
Risk to financial statements
Insignificant material misstatement risk, but may require additional oversight
Considerations
- Balance is consistently significant to the balance sheet (materiality)
- Low volume of transactions, high dollar amounts
- History of errors/out-of-period adjustments related to account
- Business unit is not integrated in systems
- System interface with manual entries
- Moderate level of manual journal entries
Types of accounts
Fixed assets, accumulated depreciation, accrued expenses
Frequency
Monthly
Preparer due date
End of period
Approver due date
End of period
Target % of accounts
50%
Low risk attributes
Risk to financial statements
Little work to reconcile, and little material misstatement risk
Considerations
- Balance is consistently insignificant to the balance sheet (materiality)
- Low volume of transactions, low dollar amounts
- No estimates
- Sufficiency of subledgers in fully supporting reconciliation
- Limited or no systems directly interfacing with GL
- Low volume manual journal entries
Types of accounts
Goodwill, Foreign currency translation adjustments, Non-current assets
Frequency
Quarterly
Preparer due date
End of period
Approver due date
End of period
Target % of accounts
40%
Want to learn more about risk ranking? Explore the 4 value drivers.