How can discrepancies in intercompany transactions be resolved in ICMR?

• A. Through negotiation between departments
• B. By ignoring minor discrepancies
• C. Manual adjustments or updates to source transaction data
• D. Outsourcing to external auditors

Answer: (C)

In the context of Intercompany Matching and Reconciliation (ICMR), resolving discrepancies in intercompany transactions typically requires precise action to ensure that all financial records accurately reflect the transactions between different entities within an organization.

Manual adjustments or updates to source transaction data is a valid approach because it enables organizations to rectify specific discrepancies directly in the originating data. This method ensures that both sides of an intercompany transaction are accurately recorded and reconciled, which is essential for maintaining the integrity of financial reporting. By updating the source data, businesses can address errors such as incorrect amounts, missing entries, or mismatched currencies that may lead to discrepancies. This method also allows for immediate corrections, ensuring that financial reports are accurate and reflective of true intercompany relationships.

In contrast, other methods, like negotiation between departments or outsourcing to external auditors, may address surface-level issues or involve longer timelines without directly resolving inaccuracies in the data. Ignoring minor discrepancies may lead to larger compliance issues or financial inaccuracies over time. Therefore, making manual adjustments is a proactive and direct method to ensure that discrepancies are effectively handled and the financial integrity upheld.