The Adjusting Entry Log: Tracking Proposed, Booked and Passed Entries by Account

During fieldwork, dozens of entries get proposed: some booked, some declined, some replaced. Without a log, the trial balance and the summary of uncorrected misstatements drift apart. The log is a single running list. It is the source for the adjusted trial balance, for the representation letter attachment and for the communication to governance. See adjusted trial balance columns for how the log feeds the worksheet.

Why a log

Three failures recur in audit files:

• An entry that management booked after the draft statements, which the auditor's trial balance does not show.
• A passed entry that does not appear on the uncorrected misstatements schedule.
• The same misstatement entered twice because two team members found it from different directions.

A log stops each of them by giving every entry one number, one status and one owner.

Fields

Keep the sign convention stated at the top: positive means the recorded amount is too high, or whichever convention the firm uses.

Status flow

1. Proposed. The preparer enters the item the same day it is found and assigns a number. Do not wait for the end of the test.
2. Discussed. The manager raises it with the client contact. The log shows the date and the response.
3. Booked. Management posts it to the client's general ledger. The log records the client's journal entry number and the posting date, and the adjusted trial balance picks it up.
4. Passed. Management declines. The entry moves to the uncorrected misstatements schedule with management's reason.
5. Replaced. A better entry supersedes it. The log marks the original superseded and links the new entry. Do not delete rows.

Never delete a row. A row that was proposed and later withdrawn stays on the log, marked withdrawn with the reason. A reviewer needs to see the whole history.

Controls

• One log per engagement, kept in the shared audit file, not on individual laptops.
• Single numbering sequence. The manager assigns or checks numbers, so duplicates do not occur.
• Weekly reconciliation between the log and the client's posted entries during fieldwork. The client's journal listing for the period shows what has been posted.
• Freeze at completion. After the file's completion date, changes follow the rules in documentation completion date and post-release changes.

Tie-out

At the end of fieldwork, perform three reconciliations and put them in the file.

1. Unadjusted trial balance plus booked entries equals adjusted trial balance. Every line.
2. Booked entries on the log equal the entries on the client's journal listing. Differences mean an entry was changed after booking.
3. Passed entries on the log equal the entries on the uncorrected misstatements schedule, by number and amount, plus projected items from sampling that are on the schedule but not on the log as entries.

Example

A distributor's log for the year, illustrative:

At the tie-out, the four booked entries total $199,100 in gross amounts (48,200 + 31,500 + 112,000 + 7,400). Their pretax income effect is a reduction of $87,100 (48,200 + 31,500 + 7,400), because only the reclassification of the equipment note leaves pretax income unchanged. The four passed items put on the uncorrected schedule $187,000 of overstatements (PJE-3, PJE-4 and PJE-7) and the $45,000 PJE-8 understatement of current-year income. These are the same four entries as in the SUM schedule worked example. The log and the schedule agree by number.

What belongs on the log and what does not

• Include every factual, judgmental and projected misstatement above the clearly trivial threshold, whether booked or not.
• Include reclassifications that change financial statement presentation, whatever the amount if material to a line, because the draft statements and the adjusted trial balance must agree.
• Exclude clearly trivial items, but do not drop them if their nature makes them important.
• Exclude client-initiated entries that the auditor did not propose. Those are on the client's journal and get reviewed in journal entry testing.

Reviewer checks

• Does each entry have a source workpaper and does the workpaper show the error?
• Is the entry's accounting right, including tax effect and sign?
• Is the client's response recorded with the date?
• Does the passed total tie to the schedule?
• Were any entries booked after the draft financial statements were prepared?
• Do any entries suggest a control deficiency or a pattern of management bias?

Link to independence

If the auditor drafts and the client simply approves entries at volume, the nonattest service question arises. Record management's review and its acceptance of responsibility for the entries. See independence and nonattest services.

CORAA prepares ready-to-review audit files for US CPA firms; the firm keeps the client, the review and the signature. See /us.

Sources

• AICPA, AU-C Section 450, Evaluation of Misstatements Identified During the Audit; AU-C Section 230, Audit Documentation
• U.S. Government Accountability Office, Financial Audit Manual, Volume 1 (GAO-26-108577), June 2026, FAM 540 (list of adjusting entries needed to correct uncorrected misstatements, communication to management): gao.gov

AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error