Reconciliation Reports and Internal Controls
Autor: philips • November 27, 2017 • Term Paper • 1,196 Words (5 Pages) • 629 Views
Reconciliation Report and Internal Controls
Name of student
University
Date of submission
A reconciliation report is a summary of the transactions undertaken by a business entity including the deposits, cash receipts, approved and cancelled checks, book and bank balances and any other disbursements. The reconciliation statement is constructed from information contained on the ledgers, business journals and financial statements. A reconciliation report provides a snapshot of the companies reconciled accounts and it’s helpful in managing cash disbursements and other transactions in the business. Reconciliation statements are important as they ensure the reliability of the company’s financial records. For this reason reconciliation must be performed on every balance sheet account regularly to ensure that the recorded transactions tally with the actual transactions recorded in other financial records (Khan, 2007). Thorough and accurate account reconciliation enhances the accuracy and reliability of the company’s financial reports and also enables the company to publish its reports confidently. Reconciliation reports are important as they enable auditors to understand discrepancies that may be present in the financial statement.
Recompilation of financial statements can be undertaken in two ways:
Documentation review-this is a formalized approach which entails evaluation of the existing records such as receipts, checks and journal entries to collect data and examine the financial statements for any irregularities which are then reconciled. The second method is referred to as analytics review and involves analysis of financial statements to ensure that there are no irregularities through comparison of non-financial and financial information. Historical information is used in estimating the amounts of the transactions recorded and any irregularities are adjusted to ensure that the information recorded on the balance sheet matches with the supporting information (Tarr, may 2010).
In the case provide, the Daisey Company is a profitable business but the managers do not pay much attention to internal controls and has given the task of book keeping and cashier to one person, Bret Turin. Bret goes ahead and steals money from the company since he is in charge of the receipts, checks and prepares the monthly bank reconciliation statements. Since Bret is aware of all the transactions throughout the month, he steals the money from the receipts not deposited and prepares a recompilation statement to conceal his actions. The recponcialition report for the company is as follows:
DAISEY COMPANY | ||||||
Bank Reconciliation | ||||||
October 31, 2017 | ||||||
| Description |
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| amount |
Bank statement balance |
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| 18565 | |
Add: a) |
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Under deposit receipts |
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| 3795.51 | |
| total |
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| 22,361 |
Less: Unpresented checks |
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| No. | Amount | No. | Amount |
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| Check no 62 | 140.75 | Check no 862 | 190.71 |
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| Check no 183 | 180 | Check no 864 | 165.28 |
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| Check no 284 | 253.25 | Check no 863 | 226.8 |
| 1,157 |
| Adjusted bank balance |
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| 21,203.72 |
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(b) and (c) |
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(b) |
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Book Balance | 21877.72 |
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Add: Note receivable collected | 185 |
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Adjusted balance per books before theft | 22062.72 |
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Less: |
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Amount stolen | 859 |
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Adjusted Book balance | 21203.72 |
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The theft were concealed by doing the following activity |
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1) The unpresented check no 62,183 and 184 were omitted of $574 |
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2) the unpresented checks which was listed by Bret (check no 862,863 and 864) was for $582.79 not $482.79 a difference of $100 |
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3) He also dint include note receivable of $185 on his Bank reconciliation |
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So the total amount concealed is $574+100+185 | 859 |
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