We all know Sarbanes Oxley deals with financial reporting. Journal entries form an part of the financial reporting and accounting process. Business control auditors should be well versed so as to understand the types of journal entries and their related risks. To make things easier, below is a description of the types of journal entries and how they affect SOX compliance.

Standard Journal Entries - Standard journal entries are used to record recurring transactions such as monthly sales, purchases, vendor payments, cash receipts from customers etc. Standard journal entries form part of the internal control system since they are routine in nature. Standard journal entries are also used to record accounting estimates.

Non-Standard Journal Entries - Entries which are made outside the normal course of business are called non-standard journal entries. Such entries may include provision for bad debts, inventory write-off, credits to customers etc. From a risk perspective, non-standard journal entries pose a risk of material misstatement. Such journal entries may be used by the management to window dress accounts. SOX auditors should be cautious about such entries.

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