Entry analyses makes use of the principle of double-entry book-keeping.
According to the principle each transaction is recorded on two accounts
(e.g. per Cash account an Revenues).
This dependency together with other information -
such as amount and description of a transaction -
establishes an audit trail between accounts and transactions.
Audit trail can be analysed. Here two ways of analysis are introduced.
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Entry analysis #1
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In the entry analysis #1 the life of a transaction in accounts
is tracked from entry to another, ultimately from "cradle to grave".
IDEA can be used in following the audit trail by making use of
information about amount(s) concerned, voucher type,
entry type (debit, credit), description and so on.
Because many factors are often needed to be taken into account in this analysis,
it may prove difficult to automate this analysis.
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Entry analysis #2
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In this analysis some kind of 'snapshot' about the relationships between entries is created.
The analysis is based on the consistencies according to which entries to different accounts are related.
E.g. money paid out from petty cash is more likely to be used to certain purposes than
to others [1].
Respectively, due to crediting cash account, it is more likely that certain accounts
in the book-keeping will be debited than other accounts.
Further, certain kind of entry combinations should not exist -
such as per Accounts Receivable an Cash (In settling accounts receivable money is more likely
to be paid in the cash than paid out) [2].
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In each organization there is a typical distribution of entries in double-entry book-keeping
reflecting relationships between accounts.
The distribution comes forth when entries are analysed
in terms of their counter entries on appropriate summary level.
In the analysis pivot table functionality is a very good tool.
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Problems
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Audit trail is weakened when several transactions are summarized before
entering them into the accounts,
which can be common e.g. in case of petty cash transactions.
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[1] If money has been paid out of petty cash, as a rule it is more likely that
this payment has been purported to finance a travel advance than to finance
an investment expense.
[2]
This analysis is an audit technique I have invented.
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