How to Audit Bank Reconciliation (2024)

FAQs

What is the audit process of bank reconciliation? ›

A bank reconciliation is the process of comparing a business's internal ledgers with its bank accounts. If there are discrepancies between the ledgers and accounts, these must be investigated and reconciled. And as with any accounting process, you should audit your reconciliations on an annual basis for accuracy.

Checklist for a Bank Reconciliation Audit

Accounting Records: Compare bank statements with the company's accounting records, including cash receipts, disbursem*nts, and general ledger entries. Transaction Details: Analyze transaction details for accuracy, including dates, amounts, descriptions, and classifications.

Check if the bank deposits and withdrawals match the records on the balance sheet. If there are any differences between the bank statement and the balance sheet, cross-check to identify the mistake's source. If the mistake is on the bank's end, contact the bank and inform them.

Reconciliation is an accounting procedure that compares two sets of records to check that the figures are correct and in agreement. Reconciliation also confirms that accounts in a general ledger are consistent and complete. Reconciliation can be used for personal as well as business purposes.

The 6 steps of the bank reconciliation process includes comparing bank to cash balances, looking at the bank statement, IDing your cash book, adjusting the bank balance and book balance and recording the reconciliation. Compare the bank account balance to the cash balance on your books.

1. Key Aspects of Auditing Bank Balances. Confirmation Procedures – Auditors often use external confirmations to verify the amounts held in bank accounts directly with the banks. This may involve sending standard letters to banks requesting them to confirm the balance amounts directly to the auditor.

A bank reconciliation can be thought of as a formula. The formula is (Cash account balance per your records) plus or minus (reconciling items) = (Bank statement balance). When you have this formula in balance, your bank reconciliation is complete.

Internal controls checklist for bank audits

Checking balance sheets and financial statements. Reconciling the bank's ledgers. Assessing internal controls over financial reporting. Verifying regulatory compliance, like Know Your Customer and Anti-Money Laundering.

How to audit the bank reconciliation? ›

Check the outstanding items listed on the reconciliation statement. Does each of the outstanding items seem to be reasonable? These will include un-cleared cheques or cash deposits, bank interest or charges, and direct debits or bank transfers. Anything very old, very large or peculiar should be checked out.

If your reconciliation doesn't balance, adjust the records to account for any missing data. For example, note uncleared checks and adjust the balance until the check clears.

The audit of banking involves various stages to complete the procedure successfully. The first stage is the initial consideration by the statutory auditor by the declaration of Indebtedness, engagement risks, team discussion. The second stage is to identify the risk of misstatement and access the risk management.

The four steps in bank reconciliation are (1) accessing and comparing deposits between a company's bank statement and its internal systems of record, (2) normalizing the bank statement as needed, (3) formatting of data from internal systems of record, and (4) comparing the bank statement and internal records to confirm ...