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Bank reconciliation statement

Suman Govil (Student) (204 Points)

20 May 2015

Can anyone tell me how to Audit the Bank Reconciliation with Bank statement and Bank Pass book?

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CA Parul Saxena (CA) (8488 Points)
Replied 21 May 2015

In BRS you will see 2 balances

1.Balance as per bank.............................Match it with Bank Statement.

2.Balance as per books...........................Match it with Bank Ledger in the books of accounts.

2ndly check BRS for any unusual entry like any cheque pending for more than 3 months??

If Bank charges appearing in BRS ask the concerned person to record it in the books and remove it from the BRS.

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Mahalaxmi (job seeker) (1203 Points)
Replied 22 May 2015

thank you

ABHINANDAN JAIN (CA Student) (886 Points)
Replied 02 June 2015

For Small clients, first you have to check the accuracy or authencity of BRS prepeared & submitted by the client to you.

For Big corporates or clients, you can avoid to chek the accuracy the preparation of BRS.

BRS How audited:

BRS is always prepared for a period (say upto 31.03.15)

BRS prepared upto 31.03.2015 may show Cheques issued but not presented till date.

Entries made in this category are crucial for auditing. In order to manupulate accounts, client may make fake entries just to make understatement of liabilities on balance sheet. Infact the main purpose of checking BRS is track such dummy entries.

Modus Operandi: Client will pass cheques for a desired amount and will shown issued to credtiors or parties etc and practically does not give the cheques to anyone. They keep those cheques with themselves in their drawer and later on after balance sheet date cancel those cheques and will show that party to whom cheques issued didn't gone to bank for presenting the cheque and rectiy the accounts accordingly.

Due to such malpractise company or client succeed in forging the accounts on balance sheet date in order to attract investor for the fact that company possess less or minimal amount of liabilities.As a result company expect from investor that they will inject their money into company thinking company is very much sound wr.t Liabilties.

How to track:

For unpresented cheques shown till March, you need to obtain Bank statement or Passbook for the subsequent months i.e. April, May & June (max 3 month, becoz as per RBI rules, a cheque is valid for a period of max 3 months). Fo better tracking you should write down the date of clearing from bank in BRS statement beside evry entries of Unpresented cheques.Those left or still not cleared has to be cancelled within the same financial year and BRS to be modified in consultation with client.

Rest are simple, follow the suggestions made by CA Parul saxena

thanks