I'm a CPA candidate who just got an auditing job and I have a client that is very disorganized, to say the least.
In a nutshell, they don't book any year end closing entries, they book a lot of sales directly to retained earnings, and they didn't record any of the previous auditor's adjusting entries.
I'm trying to reconcile equity to the prior year's audited report and am having some trouble. Basically, I adjusted retained earnings for any of the prior auditor's adjustments that had a P&L effect and reversed his accruals and reclassified any incorrect client entries out of retained earnings. To reconcile equity, I'm starting with the prior year's audited equity figures, subtracting the effects of the current years' audit adjustments that flow through equity. But I'm still coming up with a discrepancy that is too bog to "plug". I suspect that it may be a problem with their GL.
Does anyone have tips on how best to identify the source of this problem? Thanks.