A. The preparation of a bank reconciliation statement is carried out to reconcile the balances on the cash book to the company with the bank statement prepared by the bank and sent periodically to the entity.
It is mainly carried out to ensure that all receipts and payments are promptly and accurately recorded.
Controls procedures over the bank reconciliation include: –
(i) Bank reconciliation should be prepared at least monthly.
(ii) The person responsible for preparation should be independent of the receipts and payments function or, alternatively, an independent person should check the reconciliation.
(iii) If the reconciliation is prepared by an independent person, he should obtain bank statements directly from the bank and hold them until the reconciliation is completed.
(iv) The preparation should preferably include a check of at least a sample of receipts and payments against items on the bank statements.
The tests of control I would carry out on the bank reconciliation includes: –
(i) Checking whether the reconciliations are indeed prepared as required.
(ii) Examine evidence of independent review of bank reconciliations e.g. a signature of reviewer.
(iii) Examine evidence of follow-up of outstanding items on bank reconciliation‘s.
Pay particular attention to old outstanding reconciling items that should be written back such as old, un-presented cheques.
(iv) Verify that the reconciliations are accurately prepared by checking costs and that the current balances are picked as per the cashbook and bank statements.