Adjusting Journal Entries — corrections that survive
Per ISA 450, every misstatement you find must be either corrected via an AJE or documented as a passed-unrecorded item. The Adjusted Trial Balance — the basis of the financial statements — is the original TB plus every posted AJE.
The 4 AJE types (per ISA 450)
You found a real error. The auditor proposes a journal entry; if management accepts, it's posted. Affects Adjusted TB.
Amount is right but in the wrong account (e.g. long-term loan classified as current). Net effect on profit = 0.
Management refuses the AJE. Auditor evaluates whether to qualify the opinion or accept management's view. Captured in the file either way.
Misstatement exists but is immaterial. Not posted. Documented in the AJE register; aggregate of all passed AJEs is reviewed against materiality at completion.
Anatomy of an AJE
| AJE-001 · audit_adjustment · Linked: B-100 Procedure 2 | OMR | |
|---|---|---|
| Description: Reverse unidentified bank-reconciliation difference of OMR 2,500 (per ISA 330 cut-off review) | ||
| 5800 · Bank charges | 2,500.000 | |
| 1020 · Bank — NBO Current | 2,500.000 | |
| Σ Totals (must balance) | 2,500.000 | 2,500.000 |
| Status: Proposed · Awaiting management acceptance · Linked workpaper: B-100 · Procedure: #2 Bank reconciliation · Effect on profit: −2,500 | ||
Step-by-step — raising an AJE
Find the misstatement during fieldwork
While performing a procedure, you spot a difference. The system gives you a Raise AJE button right on the procedure form.
Click Raise AJE
Modal opens with workpaper + procedure pre-linked. Auto-numbered
AJE-{NNN}. Pick AJE type from the 4 above. Choose accounts (auto-complete from chart of accounts).Enter the journal lines
Debit + credit lines. System validates: must balance, accounts must exist, amount > 0, no zero-amount lines. Lines support multi-line (e.g. Dr expense / Dr VAT / Cr supplier).
Write the description
Mandatory free-text. Explain the WHY in plain language. Example: "Bank charges in Dec not booked by client; per bank statement on 31-Dec; subsequently confirmed via reconciliation."
Save as proposed
AJE goes to proposed status. Sits in the AJE register. Doesn't affect Adjusted TB yet.
Discuss with management
Print/export the AJE register, discuss with the client's CFO. If they accept, mark accepted. If they disagree, mark management_override with their reason. If immaterial and you decide to pass, mark passed_unrecorded.
Post accepted AJEs
Click Post on accepted AJEs. The Adjusted TB recomputes immediately — every account affected gets the AJE delta added/subtracted, and the lead schedules in linked workpapers refresh automatically.
The AJE register
One screen lists every AJE for the engagement, grouped by type, with running impact on profit and equity:
| AJE | Type | Description | Linked WP | Δ Profit | Δ Equity | Status |
|---|---|---|---|---|---|---|
| AJE-001 | audit_adj | Bank rec diff | B-100 | (2,500) | (2,500) | Posted |
| AJE-002 | reclass | LT loan → ST | F-100 | — | — | Posted |
| AJE-003 | audit_adj | Inventory NRV write-down | D-100 | (8,400) | (8,400) | Posted |
| AJE-004 | passed | Small accrual omitted | H-100 | (420) | (420) | Passed |
| Σ Net adjustment | (11,320) | (11,320) | ||||
Form fields per AJE
Drives whether profit is affected, whether posted, and how it's reported in the audit report.
Which workpaper raised this. Cross-reference is permanent — uneditable after post.
Which specific procedure surfaced the issue. Helps trace evidence.
The "why". Becomes part of the audit narrative.
Standard double-entry. Validation rejects unbalanced + zero-line entries.
Lifecycle. Each transition stamps user + timestamp + reason (for rejected).
From any open workpaper, click Raise AJE. Pick type "audit_adjustment", enter Dr Bank Charges 100, Cr Bank 100, description "Test entry — manual demo". Save as proposed. Check the AJE register — your AJE is there. Now mark it posted and refresh the lead schedule on B-100 — the bank balance dropped by 100. That's the live link.
Once an AJE is posted, the Adjusted TB updates everywhere. Don't mass-post 50 AJEs at once near deadline — review each one with the client first, post incrementally, and re-run the FS draft to make sure totals still make sense. Bulk posting without review is how restatement risks happen.
The passed_unrecorded aggregate is your safety margin. If you have OMR 12,000 of passed adjustments and overall materiality is OMR 14,000, you have only OMR 2,000 of headroom. The system flags this as a yellow warning at 70% of materiality and red at 90% — drop more passed entries into the file at your peril.
What's next
AJEs posted. Adjusted TB now reflects the auditor's corrections. Phase 6 takes the next step: mapping every Adjusted-TB account to a financial-statement line — so the system can build the SFP / SPL / SCF / SOCIE automatically.