Most Companys close their books at the end of every calendar month; publicly-listed firms close their books

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Question:

Most Company’s close their books at the end of every calendar month; publicly-listed firms close their books not only every month but every quarter due to the SEC Requirement of the filing of a Form 10Q every quarter containing a full set of financial statements. Then, most Company’s also close their books at the end of their fiscal year, too, whether they are calendar-year end firms or have a yearend that ends on any other date during the year. Especially for most publicly-listed forms, these firms keep their general ledger’s ‘open’ during the limited review process performed by their audit firms at quarter-end; generally, all firms of any type keep their books ‘open’ until the independent audits are performed and completed by their audit firms at yearend, too. As a result of the audit, there could be adjusting journal entries proposed by the audit firm agreed to with the Company which need to be made on the ‘open’ books before they are finally ‘closed’ and the final closing entries we all learned about in our first Financial Accounting course are finally made (for example: closing all temporary accounts to Retained Earnings via Income Summary-remember that?).

The SEC Requirement especially for publicly-listed firms is to file their Form 10K with the SEC within 75 days after the end of the financial year. Let’s assume A Company for various reasons is unable to meet this Requirement one year, including the fact that the audit performed by the auditors is also not completed. In fact, the delay is such that the first quarter ends during this delay, and now the Company is facing the Requirement to prepare and file their interim financial statements for the new fiscal year that just started.

From an accounting information systems point of view, what are your thoughts of how to deal with this situation, especially the fact that the closing of the books for the first quarter is now upon us, including the preparation of a complete set of financial statements for the first quarter? Make sure that you provide an overall solution or a recommended solution for this situation in your response.

2. The following is a completely new scenario. Let’s assume a Company which is currently privately-held is considering an Initial Public Offering (IPO). The Company has been closing its books every month end in the past and performing typical financial statement analysis on these monthly results, including budget to actual comparisons in the past. You are in-charge of both the Accounting Department and all IS activities related to the functions performed by the Accounting Department. The CFO walks into your office one day in the middle of the month, and asks you can you close the books for the month end which ends in a few days in 5 days instead of the normal 10 days it takes to close the books and make all required monthly journal entries, including deferrals and accruals. The reason for this accelerated closing is the Underwriter’s for the IPO want to evaluate the Company’s latest financial results before negotiating the price per share for the common stock to be sold in the IPO. Be specific on how you would go about organizing and meeting the CFOs request to close the books within 5 days instead of 10 days.