There are audit situations that appear in no textbook, because they are too specific, too uncomfortable and too rare to be described systematically. One of them is the reconstruction audit.
A reconstruction audit arises when an organisation has to prepare a set of financial statements or undergo an audit covering a past period, and the people who made the postings, took the decisions and produced the documentation during that period are no longer available.
I am currently supporting exactly this kind of situation.
What distinguishes a reconstruction audit from a normal audit
A normal audit of the financial statements follows a particular logic. The auditor asks questions. The finance organisation answers them. When the institutional memory is missing, the entire logic of the audit changes. An audit turns into a reconstruction. An exchange turns into an investigative process.
A reconstruction audit takes longer, costs more, produces higher audit risks and burdens the team with an effort that no normal capacity planning has provided for.
What is recorded in SAP and what is not
SAP stores considerably more than most finance staff realise. Every posting has an accounting document that contains the date, user, document type, company code and all posted line items. The change document shows when postings were subsequently amended.
What SAP does not store is the rationale behind postings. Why was a provision recognised at this level? On what basis was a value adjustment made? This information does not exist in SAP. It exists in the minds of the people who took the decisions.
The systematic approach to a reconstruction audit
Phase 1: Data preservation and system analysis
Complete extraction of all posting-relevant data for the period under audit: accounting documents, change documents, user logs, account developments. In parallel: an inventory of the documentation available from the period.
Phase 2: Materiality analysis and prioritisation
Not every posting from three years needs to be reconstructed to the same degree. The materiality analysis determines which accounts and posting periods must be prioritised. This prioritisation has to be agreed with the auditor.
Phase 3: Reconstruction from multiple sources
SAP data shows what was posted. External sources explain why: contracts, emails, minutes, management reports. Where no external source explains the rationale for a posting, a logical inference has to be drawn that is explicitly flagged as a reconstruction.
Phase 4: Documentation for the auditor
The reconstruction documentation must contain: the auditor’s question being addressed, the sources available, the logic of the inference, the result of the reconstruction, and an honest assessment of the reliability of the reconstruction.
What makes the reconstruction audit particularly difficult
The hardest part of a reconstruction audit is not the technical work. It is the uncertainty. There are postings for which the reconstruction leads to a plausible but not certain result. At that moment, it has to be communicated honestly: I can explain what this posting is. I cannot explain with certainty why it was made in this way.
What I bring to the table
I am Nicole Vekonj, Interim Manager Finance & Controlling. I support reconstruction audits operationally and with the SAP expertise needed to extract the maximum reconstructable knowledge from system data.
👉 Submit a project enquiry: zahlenkompetenz.de/en/contact
