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Process Details

  • Inputs: List of tax balance sheet accounts to be reconciled,GL trial balances or account activity reports,Tax provision system reports and roll-forwards
  • Outputs: Draft tax account reconciliation packages, List of identified discrepancies with potential root causes
  • Systems: ERP Systems (SAP, Oracle NetSuite, Microsoft Dynamics 365) Tax Provision Software

Reconciliation of Tax Balance Sheet Accounts

Agnostic

Use Case Overview

An AI agent that automates the reconciliation of tax-related balance sheet accounts (e.g., income taxes payable, deferred tax assets/liabilities) by comparing balances between the general ledger, tax provision software, and supporting tax calculations/schedules, identifying discrepancies, and gathering initial supporting documentation.

Challenges

  • High potential for costly errors from manual data handling.
  • Significant time and resources are spent on repetitive, low-value work.
  • The manual process is difficult to scale without increasing headcount.
  • Process bottlenecks lead to delays and missed deadlines.

Solution

This use case solution follows these general steps at a high level:

  1. Data Extractiona) extracts month-end/quarter-end balances for specified tax accounts from the ERP System's General Ledger, b) retrieves corresponding balances and detailed roll-forwards from the Tax Provision Software, c) accesses supporting tax calculation workpapers, tax payment proofs, and notices from Document Management Systems
  2. Matching & ComparisonCompares GL balances with tax provision system balances and prior period reconciled balances. Matches detailed transactions or movements within the roll-forward to supporting documentation
  3. Discrepancy Identification & QuantificationIdentifies any differences between systems or lack of supporting documentation for reconciled items. Quantifies the discrepancies.
  4. Reconciliation Package PreparationPrepares a draft reconciliation package, including a summary of balances, matched items, identified discrepancies with potential reasons, and links to supporting evidence

Primary Benefits

  • Increase EfficiencyDramatically reduce the time and manual effort required to complete the process.
  • Enhance AccuracyEliminate human error to ensure data integrity and reduce financial risk.
  • Empower EmployeesFree your team from monotonous tasks, allowing them to focus on strategic work that requires their expertise.
  • Improve ScalabilityHandle growing volumes of work without a proportional increase in operational costs.
  • Ensure TransparencyMaintain a complete, auditable trail of every action the AI agent takes, described in plain English.

Related Use Cases

FAQ

Which ERP systems can the agent integrate with? +

It integrates with major ERP systems (SAP, Oracle, Microsoft Dynamics, etc.) to pull GL data. It also connects with document management systems (e.g., SharePoint, network drives) where supporting workpapers are stored.

How does the agent handle unstructured data from various supporting documents like PDF tax notices or Excel workpapers? +

The Kognitos platform uses AI-powered data extraction. It can intelligently read and pull specific data points from various document types, not just structured databases.

Can we customize the format of the final reconciliation package? +

Yes. We understand that most tax departments have standardized reconciliation templates that auditors are familiar with. The agent can be configured to populate your existing templates, ensuring the output is consistent with your internal standards and meets the specific expectations of your audit firm.

What is a typical implementation timeline for the Tax Reconciliation Agent? +

Given the complexity and sensitivity of tax data, a standard implementation takes approximately 4- 6 weeks. This involves a collaborative process with your tax team to map accounts, identify source systems and document locations, configure the specific reconciliation logic, and conduct thorough testing before go-live.

What is the role of the tax professional when using this agent? +

The agent handles the “what” and the human expert handles the “why.” The agent prepares the draft reconciliation, flags the discrepancies, and provides all the linked documents. The tax professional’s role is elevated to that of a reviewer and analyst. They review the completed package, investigate the flagged discrepancies, and use their expertise to determine the root cause and resolution.

How does the agent handle a new type of supporting document or a change in a workpaper format? +

The agent is designed to be adaptable. Through the Kognitos platform, a business user from your tax team—with minimal training—can easily teach the agent how to read a new document format or where to find information in a revised Excel template.

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