If these adjustments are not made prior to the start of the audit, it is likely that the auditors will present the company with a number of adjustments that they will insist on, or else they will not issue an unqualified audit report. It is especially necessary to create year-end adjustments when the financial statements are to be audited by the company’s auditors. An efficient company controller will probably try to minimize the number of year-end adjustments by avoiding making any entries pertaining to immaterial business transactions. The number of these adjustments that are needed has a direct impact on the time required to close the books. A number of year-end adjustments may be required, depending on how diligently the books have been maintained on a monthly basis. Year-end adjustments are journal entries made to various general ledger accounts at the end of the fiscal year, to create a set of books that is in compliance with the applicable accounting framework.
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