Describe how you would test a client’s bank reconciliation

The following test should be carried out on the bank reconciliation

  • Obtain standard bank confirmation from each bank with which the client conducted business during the period.
  • Test arithmetic of bank reconciliation by recasting.
  • Trace cheques shown as outstanding from the bank reconciliation to the cash book prior to the year-end and to the after-date bank statements and obtain explanations
  • For any larger or unusual items not cleared at the time of the audit.
  • Verify by checking paying-in slips that uncleared banking are paid in prior to the year-end and review whether uncleared banking are cleared quickly after the year-end.
  • Verify balances per cash book according to the reconciliation with cash book and general ledger.
  • Verify the bank balances with reply to standard bank letter and with the bank statements.
  • Scrutinize the cash book and bank statements before and after the period-end for exceptional entries or transfers which have a materials effect on the balance shown to be in hand audit.
  • Verify by checking paying in slips that uncleared banking are paid in prior to the year-end and review whether uncleared banking are cleared quickly after the year-send.
  • Verify balances per cash book according to the reconciliation with cash book and general ledger.
  • Verify the bank balances with reply to standard bank letter and with the bank statements.
  • Identify whether any accounts are secured on the assets of the company.
  • Consider whether there is a legal right of set-off of overdrafts against positive bank balances.
  • Determine whether the bank accounts are subject to any restrictions.

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