Write a technical accounting memo with AI: structure, sources and checks

What a technical accounting memo is for

A technical accounting memo records how an entity accounted for a significant or judgmental transaction, and why. It's written for the file, for reviewers and for auditors. A reader should be able to follow the facts, the guidance and the reasoning to the conclusion without having to ask you.

Typical topics include revenue on an unusual contract, whether an arrangement contains a lease, whether a cost is capitalized or expensed, a debt modification, or a business combination.

The standard format

Many firms and companies have their own template, and if yours does, follow it. Most follow the same shape:

Before the AI starts: your facts and the guidance

The AI's general knowledge of accounting standards is not a source. Give it the material a person would need:

• your notes on the facts, taken from the contract and other documents. Take out names and identifying details first, as the client data guide explains;
• the guidance paragraphs you've read yourself, pasted in with their references. The FASB Accounting Standards Codification is the source for US GAAP;
• the question, and the alternative treatments you've considered;
• your firm's memo template, if it has one.

A drafting prompt

Draft a technical accounting memo from my notes and the guidance below, using these sections: Issue, Background, Guidance, Analysis, Conclusion.

Rules:
- Use only the facts in my notes. If you need a fact that isn't there, write [CONFIRM: ...] instead of assuming it.
- Use only the guidance I've given you. Cite the paragraph for every statement about what the guidance requires. Don't cite anything else.
- In the Analysis, set out the alternative view and explain, using the facts, why it doesn't apply.
- Keep the Conclusion no stronger than the Analysis supports. If it rests on a judgment, say what the judgment is.

Notes:
[your notes]

Guidance:
[the paragraphs, with their references]

The [CONFIRM] markers matter most. They turn the AI's gaps into a list of questions for the client or the business, instead of assumptions buried in the Background.

Check the draft in four passes

1. The facts

Check every fact in the Background against your source documents. Resolve every [CONFIRM] marker. Look for facts that appear in the Analysis but not the Background: that's often where an assumption has crept in.

2. The citations

For each paragraph cited, check that it exists, that it says what the memo says, and that it's effective for the period. The three-step check in the tax research guide works the same way for accounting guidance.

3. The analysis

Does it apply the guidance to these facts, or just restate the guidance? Is the alternative view given a fair hearing, using the real facts? A reviewer will push on exactly the point the memo skips.

4. The strength of the conclusion

Read the Conclusion straight after the Analysis. If the Analysis weighed two views and found it a close call, the Conclusion can't say the answer is clear.

If the Analysis spent two paragraphs weighing an alternative, "clearly" and "no alternative treatment is supportable" overstate it. A conclusion that names the key judgment ("On balance, we concluded that ..., based mainly on ...") matches the work and is easier to defend.

Using AI to review someone else's memo

AI is also useful as a first-pass reviewer, as long as you ask for findings rather than a rewrite.

Review this memo as a skeptical reviewer. List:
1. Statements about what the guidance requires that have no paragraph cited.
2. Facts used in the Analysis that aren't in the Background.
3. Places where the Conclusion is stronger than the Analysis.
4. Alternative views the memo doesn't address.
Don't rewrite the memo.

Then check its findings the same way you'd check its drafting. It can miss problems, and it can flag ones that aren't there.

Keep memos consistent across the team

Once a drafting prompt works, save it alongside your memo template, so everyone starts from the same structure and the same rules. Keep the rules about facts, citations and conclusions in the saved version: they're the part people drop when they're in a hurry.

When the facts change after a memo is written, such as an amended contract or new information from the client, update the Background first and work forward. Asking the AI to "update the conclusion" on its own invites a new conclusion with the old analysis underneath it.

Signing off

The memo names its preparer and reviewer, and cites the guidance, never the AI. Keep your notes and the guidance you relied on with the memo. If AI helped draft it, record that in line with your firm's policy; the AI policy template includes a clause on records.