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Sir these are the procedures I will perform on the year end bank reconciliation. Kindly confirm if this is the way to structure my answer in exam.
I will reperform the bank reconciliation to ensure it is arithmetically correct.
I will agree the balance as per bank statement reflecting on the recon to the actual bank statement and the bank confirmation letter to ensure completeness of balance.
I will agree the balance reflecting on the cash book to the balance on the GL to confirm completeness.
For outstanding lodgements as at yr end, I will trace these to the pre year end cash book and paying in slips to ensure these were actually made prior to year end. I will then trace these to post yr end bank statement to ensure they are subsequently cleared.
For unpresented cheques as at yr end, I will trace these to pre yr end cash book and cheque dispatch book to ensure they were actually posted and dispatched prior to year end. I will then inspect post yr end bank statement to see if these were cleared and obtain explanation for long outstanding cheques.
That’s good.
I think that for the first two “I will agree….” you are really checking accuracy not completeness. I’m not sure balances are described as ‘complete’. You just want to make sure that the reconciliation is using the right figures as its starting and end point.
Depending on marks/time, you could also have explained about going from cash book to bank statement (and vice versa) ticking off the items that are on both. That then leaves the O/s lodgements and cheques.Unless that is done, you haven’t really reperformed the bank rec.
sir, for bank reconciliation, do you start from the balance per bank statement, make adjustments for outstanding lodgement and unpresented cheques to get a revised cash book balance, that should be equal to the year-end balance per cash book?
therefore if you verify that the revised cash book balance (which goes into SFP) is the same as the balance per cash book at the year end, then it means that the bank reconciliation was supposedly accurate?
but to check it was accurate, you would redo the bank reconciliation to see that it is arithmetically correct?
what happens if you checked that the revised cash book balance from reconciliation, is equal to the balance per cash book at the year end, but you discover that the bank reconciliation was arithmetically done inaccurately.
does it mean it was not accurate?
I would say that the auditor would always reperform the bank reconciliation at the year end because “cash” should be one of the few figures in the SoFP that can be correct as no estimation/judgment should be required.
The mechanics of a bank reconciliation is assumed knowledge of FA/F3 – there is a proforma on page 77 of our notes which you can download or view here https://opentuition.com/acca/fa/acca-financial-accounting-fa-notes/
If you look at that proforma – it is the bottom line that should be in SoFP, If the reconciliation is arithmetically wrong that either the balance per bank statement is wrong or one or more of the reconciling items is wrong or the cash account balance is wrong.
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