The following are substantive procedures for auditing bank balance:
Obtain list of all bank accounts (including accounts closed during the year) along with closing balances. Cast list to ensure mathematical accuracy and agree balances with the financial statements;
Obtain bank confirmation latter for all bank accounts (including accounts closed during the year) and perform the following procedures:
- Agree balance as per bank confirmation latter with bank reconciliation statement (to ensure accuracy) and with list of bank accounts (to ensure completeness)
- Confirmation should be reviewed for evidence of loans, collateral or any lien/ restriction on balance
Obtain bank reconciliation statement and perform the following procedures:
- Cast bank reconciliation statement to ensure mathematical accuracy and agree balance of bank reconciliation statement with bank statement and cash book.
- Trace deposit in transit into deposit slips and cash book of correct month , and in bank statement of subsequent month. for significant delays inquire explanation from management
- Trace unpresented cheque into cash book of the current month; and in the bank statement of the subsequent month. For significant delays inquire explanation from management.
- For untraced items examine supporting documentation
Perform cut off test on cheque receipts and cheque payments
Review cash book and bank statement for large transfers near year end as indication of window dressing
main sources of evidence in audit of bank balance are ‘bank reconciliation statement and bank confirmation latter.