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Audit Checks.
Small Checks Greater Task.

Checking of Bank Reconciliation

The verification of Bank Reconciliation Statement is to be done in all types of audit and is considered a basic task to be carried out by the auditors. Though audit check is an essential part of an audit exercise, it is not to be taken as routine checks as this small check will give larger and vital information. The simple format of the Bank Reconciliation Statement is looked as under:

Bank Reconciliation Statement for the month of ................. as on

Name of the Bank ___________ Type of A/c ___________ A/c Number ______________

Routine Audit Checks - Greater Task Verification of Bank Reconciliation

S.No.

Particulars

Rs.

Rs.

01

Balance as per Bank Book

xxxx

xxxx

02

Reconciliation Items:

Add: Cheques deposited but not credited

xxxx

xxxx

S.No.

Cheque/Instrument No.

Rs.

Credit in the account but not entered in the bank book

xxxx

xxxx

TOTAL

xxxx

xxxx

03

Less: Cheques issued but not presented

xxxx

xxxx

S.No.

Cheque/Instrument No.

Rs.

   

Debits in the account but not entered in the bank book

xxxx

xxxx

SUB TOTAL

xxxx

xxxx

BALANCE AS PER BANK STATEMENT

xxxx

xxxx

               

We can also adopt the reverse method i.e., Balance as per Bank statement as starting point and reaching to the Balance as per Bank Book.

The Bank Reconciliation Statement is prepared for the month of ............ as on the last date of the month.

The verification tasks to be carried out are listed as under:

1.Verication of the balance as per bank book from the bank account maintained by the auditee. Ledger account of the Bank. Similarly, Verification of the balance as per the bank statement from the bank statement of the account as well as from the confirmation of Balance letter issued by the respective bank. The confirmation of the Balances directly by the auditors for the verification of the reconciliation statement at the end of the year is consider as more reliable.

2.Verification of the deposit slips for cheques /instruments deposited but not credited by the bank. If there is delay in crediting the cheque the reasons for same should be ascertained. Whether the cheque deposited is from the regular customer, or from the party have regular dealing with the auditee should also be verified. The only cheque from the only new party at the end of the year should be taken for the scrutiny. The amount of the cheque should be in the range of such cheques received earlier.

3.In case of credits in the bank statement not entered in the bank book the reason for the same should be ascertained as well as delay should be questioned. The circumstances lead to cash deposited but not credited in the bank should also be verified. This may be possible in cases where cash was collected after banking hours at the retail center and will be deposited in the next morning in the bank but entry in the bank book is done as a part of the system and authentication. In such cases, the insurance cover for the cash holding also to be verified for adequate coverage.

4. Verification of period validity of the deposited but not credited by the bank should also be looked in to. Per RBI cheques, Drafts, Pay Orders, and Bankers Cheques are valid for 3 months from the date of the instrument.

 

5.Cheques issued but not presented to be verified whether the cheques numbers of series are from the series used by the auditee. The period validity of the cheques issued also to be verified. In case validity expires insists for reversal of the respective entry. The cheques issued to the party should have regular dealing with the auditee. Verify if singular entry at the end of the year as well as cheques out of the range issued generally to the parties.

6.Debits in the Bank account not accounted in the books of account/ Bank Book. These items should be verified by ascertain the reasons for not accounting or delay in accounting the entry. The Name of the party to whom the amount is transferred or paid. Confirmation of the party that such amount is received by him. Instruction/ communication to and from the bank related to such transactions should be thoroughly verified.

7.The Age wise classification of the reconciliation items should be done to ascertain whether the same are within the average age of such transactions. The initiative / steps taken by the auditee for adjustment old the reconciliation items should also be verified.

8.Over and above, it is advisable to go through the Bank Correspondence File kept with the auditee for the month, to ascertain whether any communication is undertaken for the reconciliation items. We should also look for any odd man (reconciliation item) in the common man line. We have also to kept in mind the business activities of the auditee to have greater view on reconciliation items.

 

Conclusion

Though the checking of Bank Reconciliation statement from month-to-month basis makes the task more mechanical, in case a small attention on above points will lead to either better audit judgement or noticing of major audit qualification/point.

Small Check Greater Task
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Category Audit, Other Articles by - CA Satish Badve 



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