We just wrapped up another internal control season, and if you’re expecting the biggest finding to be something cutting-edge and dramatic, I hate to disappoint.
It wasn’t a sophisticated fraud scheme. It wasn’t a technology gap. It wasn’t the kind of thing that makes for a great conference story.
Across clients, across industries, across organizations of every size and maturity, the biggest finding was the same:
Working papers and reconciliations not following the basics.
And yet, working papers remain one of the most underleveraged tools in the control environment and one of the fastest ways to add value.
Consider this our post-season debrief, delivered with good intentions and strong coffee. The fundamentals still matter. Maybe more than ever.
Strong working papers:
- Provide reliable audit evidence.
- Improve the accuracy and completeness of financial statements.
- Make external audits faster and smoother.
- Support internal audit and compliance reviews.
- Enable knowledge transfer, cross-training, and continuity.
Here are some best practices worth revisiting with your team.
Best Practice #1: Understand the Underlying Transaction
This may sound obvious. And yet. Here we are.
Too often, people prepare reconciliations without fully understanding what they’re actually reconciling. Early in my career as an auditor, I once asked someone what a particular entry meant. She had been booking it every month — for 15 years — and couldn’t explain what it represented.
It’s more common than you’d think. We find reconciliations that have all the superficial elements in place: tidy formatting, consistent layout, no smoking guns on the surface. But the reconciler can’t explain why an accrued liability has been sitting there for four years, what that intangible asset on the books actually represents, or what the contingency in the balance sheet is about.
That’s a red flag.
A working paper isn’t just a mechanical exercise. It isn’t just about agreeing A to B. It should reflect a real understanding of the account and the transactions behind it. Good preparers ask questions like:
- Why hasn’t this accrual moved in five years?
- Why is this balance still sitting here?
- Is this treatment still appropriate?
One of the most dangerous assumptions in accounting is: “That’s how we’ve always done it.” (Closely followed by: “I’m sure someone knows what this is.”)
Understanding always matters more than formatting. A perfectly formatted reconciliation that nobody understands is not a strong control. It’s a very pretty problem.
Best Practice #2: Document the Steps
A strong working paper should show exactly how the work is done. A simple cover sheet or step-by-step instructions can make an enormous difference.
Ask yourself: Could someone walk in tomorrow and complete this reconciliation using only your documentation?
If the answer is no, your working paper is missing an opportunity. Your future self (or your colleague on maternity leave coverage) will not thank you.
Clear steps help with cross-training, staff turnover, internal audit reviews, and consistency in monthly close procedures. Even a one-page cover sheet can dramatically improve clarity and repeatability. Make your reasoning visible: address key judgments, risk assessments, sampling decisions, and any departures from standard procedures.
Bonus tip: include review steps, not just preparation steps. The review is half the control.
Best Practice #3: Clearly Show Preparation and Review Information
This one is basic yet often missing.
Every working paper should clearly show:
- Prepared by / Date prepared
- Reviewed by / Date reviewed
Why does it matter? Because the timing of the review is part of the control.
If something was prepared in January but reviewed in April, that review isn’t very effective. It’s the accounting equivalent of checking the smoke alarm batteries after the fire. Timely review is especially critical for monthly reconciliations, journal entries, balance sheet accounts, and accruals and estimates.
Clear documentation demonstrates that the control actually happened when it was supposed to.
Best Practice #4: Use a Simple Checklist
You don’t need a fancy system to build good controls. In many cases, a simple month-end checklist is one of the most effective tools available, and one of the most underused.
A checklist helps ensure all required steps were completed, nothing was skipped, and it’s clear who is the preparer and who is the reviewer. It creates a consistent standard across the team, and consistency is a powerful internal control.
From an audit perspective, a checklist provides evidence that the steps were completed and reviewed, and that nothing fell through the cracks. Simple, practical, and often the first thing that gets dropped when things get busy. Don’t drop it.
Best Practice #5: Clearly Tie to Supporting Documentation
Effective working papers must tie back to their supporting documentation. Isn’t that the most fundamental thing they are designed to do?
If it’s not obvious what reports, schedules, or subledgers were used to build a reconciliation, then the reviewer ends up reverse-engineering where the numbers came from. Nobody has time for that, and nobody enjoys it.
Strong working papers make those connections explicit:
- What report or schedule does the balance tie to?
- What is the source system (ERP, subledger, spreadsheet)?
- What date was the report generated?
- What filters or parameters were used?
A working paper should never feel like a mystery novel. Anyone reviewing it should be able to trace the numbers back to their source without guessing, Googling, or calling the preparer at 4:45 PM on a Friday.
Best Practice #6: Use Simple Tools That Fit Your Process
There’s a lot of discussion right now about tools for managing reconciliations and working papers. Specialized software can make sense in large or complex environments, but strong working papers don’t require expensive systems.
Fancy systems won’t fix the fundamentals. Many organizations already have what they need:
- SharePoint or Teams for tracking and checklists
- Excel templates for reconciliations
- Simple manual checklists followed consistently
The key isn’t the technology. It’s the discipline of the process.
That said, newer tools are creating real opportunities. AI tools like Copilot, ChatGPT, or Claude can generate step-by-step procedures quickly, help review documentation, and assist with building macros or automating repetitive tasks. Even simple experimentation with these tools can lead to faster documentation, better-structured working papers, and stronger supporting evidence.
Technology should support the process, not replace the fundamentals. AI won’t save a reconciliation nobody understands. And AI won’t be responsible for errors or “hallucinations” — always check its work carefully.
Best Practice #7: Stay Open-Minded About AI in Accounting
The role of AI in accounting is evolving quickly, and it is genuinely useful for tasks like:
- Extracting data from invoices or bank statements
- Matching transactions across documents
- Generating clean templates and documentation
- Assisting with review and cross-checking
- Generating code to support working papers
The key is staying curious and open-minded. Anything that improves clarity, traceability, and efficiency is worth exploring. Just don’t let the tools outpace the judgment behind them.
Final Thought
Working papers are often treated as administrative. In reality, they’re the foundation of audit quality and financial reliability.
Even as AI transforms accounting, the fundamentals remain: clear documentation, strong reconciliations, and sound professional judgment.
From our experience at Risk Oversight, we’ve found that improving working papers remains one of the fastest and most practical ways to strengthen internal controls. It’s not glamorous. But neither is explaining to your Audit Committee why the reconciliation nobody understood turned into a restatement.
A Health Check for Your Working Papers
A quick 10-minute test for your team.
Use this checklist to assess whether your working papers are actually doing their job, not just filling a folder.
- Do you understand what you’re reconciling?
- The preparer can explain the account and the transactions behind it
- Old, unusual, or unchanged balances have been investigated, not just carried forward
- “We’ve always done it this way” is not an explanation for anything
- Are the steps documented?
- A cover sheet or step-by-step instructions exist
- Someone else could perform this work using only the documentation
- Review steps are included, not just preparation steps
- Is preparation and review information clearly shown?
- Prepared by and date are documented
- Reviewed by and date are documented
- The review was completed on time (not two months later)
- Is there a process checklist?
- A month-end checklist exists and is being used
- Preparers and reviewers are clearly assigned
- The checklist is consistent across the team
- Does it clearly tie to supporting documentation?
- The source system, report, or schedule is identified
- Report date and parameters are noted
- A reviewer could trace the numbers without asking questions
- Are the tools appropriate and efficient?
- The tools being used fit the complexity of the task
- There are no unnecessary manual workarounds that could be simplified
- AI or automation opportunities have been considered, where they add value
Looking for more techniques to strengthen your internal controls or accounting processes? If you need support with your internal control, internal audit, or GRC program, I’d love to connect. Reach me at adrienne@riskoversight.ca.