Question

QUESTION 5       

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.

Page 17 of 17



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.

Answer 1

Bank Reconciliation is a very necessary activity for any business organisation.

It is performed by the person who looks after the accounts of the company.

It is basically matching your bank balance as per the books of accounts with the bank statement.

It is very much required that the audit of the bank reconcilaition should be done on monthly basis.

The procedures normally followed by me as an auditor while auditing bank reconciliation would be:

1.Will first collect the data from the client's accounts department in the form of Bank General Legder and Bank Statement for the year.

2.Will make sure that the closing balance as per the bank statement matches with the opening balances as per th baank ledger. Both the figures should match.

3.If any difference is there then identify why is the difference and the reason behind the same?

4.The transactions of the bank ledger should match with the transactions exactly in the bank statement.If any transaction does not matches hen highlight the same so that the reason behind the difference can be identified.

5.The items that are not matching are known as reconciling items and these will satnd in the bank reconcilaition statement.

6.Make ensure that the organisation is performing bank reconciliation on monthly basis so that the non mathcing transactions should not become in bulk at the end of the year.

7.The total of non matching transactions should be exactly equal to the difference in the balances of general ledger statement of the client and the bank statement they have shown.

As in this scenario the deposit has been by mistaken credited to the client account then I will ask the client to get the same rectified at the end of the bank.

The client can get the same done either by personally visiting the bank or having a telephonic conversation as it may be convinient for the client.