Question

You are in charge of the audit of “cash and bank” at Beachbreak (Pty) Ltd for the financial year – end February 2018. During the interim audit conducted during late December 2017, you had audited the bank reconciliation at 30 November and found it to be correct. During March, as part of your normal year – end procedures, you are preparing to audit the bank reconciliation prepared by Otis Redding and presented below.

Bank reconciliation at 29 February 2018 – Beachbreak (Pty) Ltd
Balance as per cashbook $127 261.30
Add: outstanding cheques
49378 3 October 2017 4 447.35
52133 10 December 2017 15 210.65
52876 18 February 2018 9 316.00
53192 22 February 2018 943.89
53193 22 February 2018 47 209.11 77 126.00
204 387.30
Add: direct deposit: Note 1 18 649.30
223 036 60
Less: bank charges and fees for February 2018 (163.00)
Balance as per Bank statement 28 February 2018 222 873.60
Note 1: This represents a deposit credited in error by the bank, to Beachbreak (Pty ) Ltd’s account on the 17 February 2018.
YOU ARE REQUIRED TO describe the audit procedures you would conduct on the bank reconciliation of Beachbreak (Pty) Ltd at 28 February 2018. (25)

Answer 1

In order to conduct the audit on bank reconciliation of Beachbreak Pty Ltd as at February 28, 2018 the following procedures shall be followed by the auditors:

1. Firstly the auditor must go through each items in the bank reconciliation statement. Each item should be appraised both in bank statements as well as cash book of the company to ensure that these transactions have occurred the way these have been reported.
2. Auditors should verify that the cheques that have been issued but still not presented in the bank for payment (outstanding cheques) are in fact correctly mentioned in the bank reconciliation statement.
3. The direct deposit should be verified by the auditor that it has been made and credited in the bank.            
4. The bank charges have been correctly mentioned in the bank reconciliation statement.
5. If possible the reason for non-presentation of cheques shall be found out by the auditors by requesting intimation from the parties.