How can a company ensure compliance on manual journal entries?

Implementing system validations is a critical method to ensure compliance on manual journal entries. System validations can automatically check and enforce compliance with predefined rules and criteria at the point of entry. This minimizes the risk of errors and ensures that all manual entries meet specific standards, such as proper documentation, legitimacy of transactions, and adherence to regulatory requirements.

When organizations rely solely on human oversight or periodic reviews, they cannot always guarantee that every manual journal entry is accurate and compliant. System validations provide an ongoing, automated layer of security that reviews entries as they are made, helping to prevent non-compliant entries before they enter the accounting records.

In contrast, while training employees, reviewing past entries, or limiting access can contribute to compliance in a general sense, these methods do not provide the same level of immediate, automated safeguarding that system validations offer. Training may ensure that employees understand compliance, but it doesn’t prevent mistakes. Reviewing past entries addresses issues after the fact, while limiting access can reduce the risk but doesn’t eliminate the possibility of non-compliance when access is granted. Therefore, system validations represent the most proactive and effective approach to ensuring compliance in manual journal entries.