Audit of bank statement:
The bank column of the cash book should be verified with the bank statement or bank pass book according to the following procedure.
1. Debit side of the cash book:
The amount shown as deposits in to the bank should be checked with the credit side of the bank statement. The date entries in both the above records should be compared and it should be noted that they do not materially differ from each other. The corresponding entries which do not appear in the bank statement, pay in slips should be examined to ensure that the amounts were in fact deposited in to the bank.
2. Credit side of cash book:
All entries in respect of payments by cheques dishonored cheques relating to bank collections, interest and bank charges, or any other amounts charged by the bank should be checked with the debit side of the bank statements.
3. Casts:
A test check of casts, cross casts and carry forwards of bank statements is also suggested.
Check of bank reconciliation:
The bank reconciliation should be checked as under:
a. Bank balance as at closing date should be verified from the bank certificate directly received from the client’s banker.
b. Amounts deposited but not credited by the bank should be verified from the pay in slips and with the subsequent realizations noted in the bank statements of subsequent period. Entry by debit to the respective debtor and credit to the bank account should be made relating to those cases of dishonored cheques which were returned with the remarks of insufficient funds or refer to drawer etc.
c. Subsequent clearance of all cheques issued but not presented for payment as at the closing date should be traced in to the bank statement of subsequent period.
d. The closing balance in respect of cash book shown on the bank reconciliation statement should be checked with the closing balance indicated on the cash book.
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