Definition
The general ledger holds every account in the chart of accounts, with each posted journal entry showing date, accounts, amounts, and source. Subledgers, such as receivables, payables, and fixed assets, roll up to control accounts in the general ledger. Reports drawn from it include the trial balance, income statement, and balance sheet.
Why it matters in an audit or review
Auditors use the general ledger to select journal entries for testing under AU-C 240, looking for unusual entries, entries by unexpected users, and postings after period-end. They need to establish that the ledger is complete and agrees to the trial balance and subledgers before relying on it. Data exports should be checked for completeness by comparing totals and entry counts with system reports, because a partial export can omit transactions without any warning.
Example
(Illustrative) A subledger aging totals $812,400 but the receivables control account shows $805,900. The $6,500 difference points to manual entries posted directly to the control account and bypassing the subledger.
Common mistakes
- Treating a GL export as complete without reconciling its totals.
- Ignoring entries posted to control accounts outside the subledger.
Sources
- AICPA, AU-C Section 240, Consideration of Fraud in a Financial Statement Audit (journal entry testing)
- AICPA, AU-C Section 500, Audit Evidence (reliability of information produced by the entity)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error