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Hello
In a given situation, the bank account is USD, the bank rec is shown in local currency and there is a reconciling item of foreign exchange difference for lets say $15,000 in local currency (as shown in the bank rec). Tests are done for deposits and outstanding cheques so my question is should an audit test be done for this FX diff? If yes, please describe.
ThanksA bank reconciliation is reconciling the company’s cash balance as held by the bank with the equivalent figure as recorded by the company in its own accounting records.
Unless we are looking at a hyper-inflationary economy, the difference between the two balances is unlikely to be of the magnitude of $15,000!
Would there be a test? If the exchange difference really were $15,000, in the context of the bank reconciliation, that’s almost certainly an immaterial amount and would not likely excite the auditor into performing audit testing. Rather our intrepid hero would more likely perform (effectively) “one-for-one” tests of payments and receipts
Those are my thoughts – maybe others have different thoughts. It would be interesting to hear / read them
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