How to Prepare Reconciliation Evidence for Provision 29

It is two weeks before year-end, and the finance team is asked to produce the evidence supporting a material balance sheet reconciliation.

The final spreadsheet is easy to find. The original supporting report is in a shared folder, the reviewer’s approval is in an email, and the explanation for one large reconciling item sits in a message thread with somebody who has since moved roles.

The control may have operated correctly, but proving it now requires several people to reconstruct what happened.

Provision 29 of the UK Corporate Governance Code makes that situation harder to ignore. For companies reporting against the UK Corporate Governance Code, the board must declare whether material controls were effective at the balance sheet date. That conclusion should be based on work carried out and evidence obtained.

Finance teams cannot wait until the annual report is being prepared to decide what that evidence should look like. The process needs to be built into each reconciliation as it happens.

Start with the material accounts

The first task is not to treat every balance sheet account in exactly the same way. It is to identify which reconciliations support material financial controls and apply the appropriate level of oversight.

A high-value cash account with significant transaction volumes carries a different level of risk from a low-value account with little movement. Intercompany, tax, inventory, accounts payable and payroll-related accounts may also require closer attention because of their value, complexity or importance to financial reporting.

Finance, internal audit and control owners need to agree which reconciliations are material, how often they should be completed and what level of review each one requires.

This risk-based approach gives the organisation a defensible account population and directs attention towards the controls that matter most.

Make ownership part of the control

In a spreadsheet-based process, responsibility is often managed through a separate month-end tracker. One file lists the accounts, another contains the reconciliations, and the approval may take place through email.

That separation makes it harder to prove who was responsible for the control at a particular point in time.

The reconciliation itself should identify the preparer, reviewer and approver. It should also record when each stage was completed and what happened if a deadline was missed.

Ownership of exceptions is equally important. Finding an unexplained difference is only the first step. The organisation also needs to show who investigated it, what action was required and whether the issue was resolved.

When ownership is embedded in the workflow, there is less reliance on manual trackers and personal follow-up.

Keep the evidence with the reconciliation

A balance sheet reconciliation is only as useful as the information supporting it.

For a bank account, that might include the relevant statement and cashbook records. For accounts payable, it could include supplier statements, ledger information and explanations for long-running items. Intercompany balances may require confirmations from another entity, while tax accounts may rely on supporting calculations.

When these documents are saved separately, the connection between the final reconciliation and the evidence used to prepare it can become unclear.

Version control creates another problem. A reviewer may be looking at one version while the preparer updates another. The file eventually marked as final may not contain the comments or changes that led to its approval.

Keeping the supporting documents and review history with the reconciliation creates a more reliable record. Somebody testing the control later can see which evidence was used, rather than relying on filenames or email dates to determine the correct version.

Record what happened to every exception

A zero difference is not the only sign of a well-controlled reconciliation.

Many accounts contain legitimate reconciling items caused by timing differences, unposted transactions or information awaiting confirmation. The important point is whether those items were properly understood, recorded and followed through.

A strong exception record explains the difference, its value and likely cause. It also shows who owns the action, when the item is expected to be resolved, and whether it remains outstanding in a later period.

This is particularly important for items that roll forward from one month to the next. A reconciling item that appears repeatedly without clear action may indicate that the control is identifying a problem without ensuring its resolution.

Management also needs visibility across the wider account population. If several high-risk reconciliations contain old or unowned exceptions, that information should be available before the balance sheet date.

Preserve the review history

A review is not simply a name and date added to the bottom of a spreadsheet.

The reviewer may question a balance, request further support, or ask the preparer to amend the reconciliation. Those interactions form part of the control evidence because they show that the review involved more than recording an approval.

If the initial submission is replaced by a new file and the reviewer’s comments remain in email, much of that history is lost.

A structured reconciliation workflow retains the movement from preparation through review to approval. It shows when the reconciliation was submitted, which questions were raised, how they were addressed, and when final approval took place.

This gives internal and external auditors a clearer view of the control and reduces the need to sample separate email records.

Test the process before year-end

One of the most useful Provision 29 readiness exercises is to test how quickly the organisation can retrieve a complete reconciliation record from an earlier period.

Choose several accounts that support material financial controls and ask the team to produce the original balance, supporting evidence, preparer and reviewer history, identified exceptions and proof of final resolution.

The purpose is not only to check whether the documents exist. It is to understand how much manual work is required to bring them together.

If the answer depends on the knowledge of a particular employee, an old email chain or a locally maintained folder structure, the evidence process is vulnerable. Staff changes, absences and inconsistent working practices will make the same exercise harder across a larger account population.

Testing early gives the finance team time to improve the process before the first declaration cycle reaches the balance sheet date.

Build the evidence into SAP

The most sustainable approach is to create the control evidence through the normal reconciliation workflow.

BEST’s Balance Sheet Recons module operates inside SAP, using the financial information already held in the system. Accounts can be prioritised according to risk and routed through defined preparation, review and approval stages.

The supporting evidence remains connected to the reconciliation. Exceptions can be assigned, monitored and carried through to resolution, while the full history is retained for later review.

This avoids creating a second evidence-gathering exercise at year-end. The information required by finance, internal audit and external audit has already been created while the work was performed.

It also gives management clearer oversight during the year. Overdue reconciliations, pending approvals and unresolved exceptions can be identified before they become balance sheet date problems.

Preparing for the first declaration cycle

Provision 29 does not require finance teams to remove every manual process. It does make it more important to understand whether those processes create consistent, retrievable evidence.

The preparation should begin with the accounts that support material controls. From there, finance teams can assess ownership, supporting documentation, exception handling, review and approval.

The final question is whether somebody independent of the original preparer can open the record and understand exactly how the control operated.

If the answer requires several systems, folders and conversations, the process is adding unnecessary work and risk to the first declaration cycle.

BEST provides SAP-certified reconciliation modules that help finance teams manage the control and its supporting evidence inside SAP. Book a demo to see the workflow against your own reconciliation process.