Question

Why is it important to prepare a bank reconciliation for each bank account at the end of the month

b) Does it make sense for the same person who prepares the daily cash deposits for the company to also perform the monthly bank reconciliation (in your answer, be sure to name any specific internal control procedures that may be applicable)?

c) Describe the different types of audit opinions.

Answer 1

IMPORTACNCE OF BANK RECONCILIATION STATEMENT

it is very important tool for internal of cash flows.

it helps in detecting errors, frauds and irregularities occured if any at the time of passing entries in the cash book or in bank pass book, weather intentionally or unintentionally.

since frauds can be dected on the preparation of the bank reconcilition statement therefore the accounts will be careful while preparing and maintaining the records of the business enterprise hence it works an important mechanism of internal control

the reconciliation will bring out any errors that may have been committed either in the cash book or in the bank pass book

any undue delay in the clearence of cheques will be shown up the reconciliation

a regular reconciliation discoursges he staff of the customer or even that of bank embezzlement( there have been many cases when the cashier mereily made entries in the cash book but never deposited the cash in the bank , they were to get away with it only because of lack of reconcilition

it helps in finding out the actual position of the bank balance and helps to find the cause of difference between in the balances of the both books it may arises because of the timing differences and difference arising due to errors in recording the entries

BECAUSE OF THE ABOVE IT IS IMPORTANT TO PREPARE THE BANK RECONCILIATION STATEMENT AT THE END OF MONTH

B) it willl be a problem that if the same person who prepares daily cash reports also prepares the bank reconciliation statement it effect internal check that is work carried out by one person should be automatically checked by another person if the same person does the two the two thinghs it is not possiblle to check his work leads to make frauds and errors

for example if the person who prepares cash deposit did any fraud or error cant be recognised with bank reconciliation statement even he find the mistakes he did not show because of job lossing option etc

internal controel procedure of SEPARATION OF DUTIES will effect by seperating of duties there will be less chances to commit fraud or error by single employee

no single person should not have independent control over any important aspects of bussiness and all the acts of one person should be under the review of annother then only it add strength to the internal control system otherwise leads to weakness

it also effects the PERIODIC RECONCILIATION of internal control procedure the purpose of reconcile will be use less because it can't find the difference between cash book and bank statement by comparining with the bank reconciliation satament

C) DIFFERENT TYPES OF AUDIT OPINIONS ARE

the auditor's opinion can be broadly be divided into two categories

a) unqualified opinion

b) modified opinion - qualified

- adverse

- disclamiar

1) UNQUALIFIED OPINION; audtitor expresses unqualified opinion when he concludes that financial statements are prepared in al material respects as per applicable financial reporting framework

to obtain reasonable assurance about the mistatement he should consider the sufficient and appropriate audit evidence , materiality of uncorrected misstatements adequecy pof disclosures,consistence of accounting policies reasonables in estimates realibility and relavence financial informationand also consider overall presentation of financial statement to be fair

however he expresses modified opinion when he

- concludes that the financial statements as a whole are not free from the material misstatements or

- is unable to obtain sufficient and appropriate evidence to form conclusion

QUALIFIED OPINION; auiditor expresses qualified opinion when he concludes that there is a material mistatement in the financial sataement but it is not so pervasive and he is unable to obtain evidence with respect to material matter but it is not pervasive

major opinions are qualified only beacaues of accounting itself have some limitations like estimations etc but he should mentions reasons or basis for qualified opinion

ADVERSE OPINION; he express adverse opinion when he concludes that financial statements are materially mistated and effect of such mistatements is so material and pervasive on the financial statement that only qualified opinion will be insufficient,and he willl express adverse opinion

DISCLAIMER OF OPINION: auditor express this opinion when his inability to obtain sufficient appropriate evidences is so material and pervasive,and that qualification is in sufficient he his not able to obtain sufficint and appropriate evidence and thus the auditor does not express his opinion on the financial statement

when his scope is limited by the management and not possible to perform alternate procedure and the effect is material and pervasive he shall either resign or express a disclaimer