How to Audit Bank Reconciliation

Steps to Audit Bank Reconciliation Statements

Automated accounting software like Xero streamlines the process, going through your figures line-by-line to flag inconsistencies. It does this without overlooking details or getting tired, and bank reconciliation all at a much faster rate. So, while it’s important to learn how to audit bank reconciliations, you could also consider investing in automated accounting software for greater accuracy.

Steps to Audit Bank Reconciliation Statements

The statement itemizes the cash and other deposits made into the checking account of the business. The statement also includes bank charges such as for account servicing fees. In order to begin, we need a copy of the bank reconciliation of the month we wish to audit, a copy of the corresponding accounting records, and a copy of the bank statement for the month in question. Automating bank reconciliation can bring numerous benefits to a business, including increased accuracy, productivity, and cost savings. By using software tools to automate bank reconciliation, businesses can focus on other critical tasks and make informed business decisions based on accurate financial data. Incorrectly recording transactions in the accounting system can result in errors in the balance sheet and bank statement, making it challenging to reconcile.

Step 2. Match Book Deposits to Statement

Record any bank fees, interest income, or errors found on the bank statement that are not yet in your accounting records. Compare each transaction from your accounting records with those listed on the bank statement to spot any differences. Auditors use bank statements to track the financial activity of individuals, companies, or businesses, ensuring accuracy in financial reporting. When auditing bank statements, it’s important to verify basic details like the account number, currency, routing number, and name. Small errors are important to catch because the statements could be linked to a different account.

Steps to Audit Bank Reconciliation Statements

Automation can solve the problem of time-consuming manual reconciliation and reduce errors. Cross-checking the bank statement and balance sheet can be done without human intervention using software tools. Not recording all transactions in the accounting system can lead to discrepancies between the balance sheet and the bank statement, making it difficult to reconcile. Reconciling your accounts is not optional due to the necessity for all companies to file annual statements, summarising a year’s worth of transactions accurately.

Data Integration:

For example, your bank statement shows that your ending balance is $11,450, while your G/L balance according to your trial balance is $10,850. Most business owners receive a bank statement, either online or in the mail, at the end of the month. Most business accounts are set up to run monthly, though some older accounts may have a mid-month end date. Bank reconciliation helps to identify errors that can affect estimated tax payments and financial reporting.

Steps to Audit Bank Reconciliation Statements

Consider performing this monthly task shortly after your bank statement arrives so you can manage any errors or improper transactions as quickly as possible. Infrequent reconciliations make it difficult to address problems with fraud or errors when they first arise, as the needed information may not be readily available. Also, when transactions aren’t recorded promptly and bank fees and charges are applied, it can cause mismatches in the company’s accounting records. Interest is automatically deposited into a bank account after a certain period of time. So the company’s accountant prepares an entry increasing the cash currently shown in the financial records. After adjustments are made, the book balance should equal the ending balance of the bank account.

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