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Obtain the company’s bank reconciliation and check the additions to ensure arithmetical accuracy.
– Obtain a bank confirmation letter from the company’s bankers.
– Verify the balance per the bank statement to an original year end bank statement and also to the bank confirmation letter.
– Verify the reconciliation’s balance per the cash book to the year end cash book.
– Trace all of the outstanding lodgements to the pre year end cash book, post year end bank statement and also to
paying-in-book pre year end.
– Examine any old unpresented cheques to assess if they need to be written back into the purchase ledger as they are no longer valid to be presented.
– Trace all unpresented cheques through to a pre year end cash book and post year end statement. For any unusual amounts or significant delays obtain explanations from management.
– Agree all balances listed on the bank confirmation letter to the company’s bank reconciliations or the trial balance to ensure completeness of bank balances.
– Review the cash book and bank statements for any unusual items or large transfers around the year end, as this could be evidence of window dressing.
– Examine the bank confirmation letter for details of any security provided by the company or any legal right of set-off as this may require disclosure.Question: how to understand – Verify the balance per the bank statement to an original year end bank statement and also to the bank confirmation letter?
what is the original year end bank statement? mean the one not reconcile before?
There has to be a bank reconciliation because, in general the balance per the bank will not equal the balance shown in the cash book (timing differences, bank charges etc). On the bank reconciliation one of the figures shown will be the bank’s view of the balance and you have to make sure that is correct. Therefore, get the original bank statement (ie not a copy, but the actual document sent by the bank) to ensure the correct figure has been used.
The bank certificate is sent by the bank to the auditor showing the bank’s view of the balance at year end. That should agree with the balance on the bank statement and to the starting balance on the bank reconciliation.
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