Module VI· Model Auditing & DebuggingBasic
Question

What is the most common cause of a balance sheet that does not balance?

Answer

The most common cause is a broken cash flow statement or retained earnings link. Net income may not flow to retained earnings, cash flow may not link to balance-sheet cash, or working-capital signs may be wrong. Start with cash, retained earnings, debt, PP&E, and working-capital roll-forwards before hunting obscure errors.