Answered: Evaluate the effectiveness and state…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 31CYBK

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Question

Evaluate the effectiveness and state the shortcomings of the
preparation of a bank reconciliation by the controller in the manner described in the
following statement: “When I reconcile the bank account, the first thing I do is review
the sorted list of returned checks and find which numbers are missing. Next I determine
the amount of the uncleared checks by referring to the cash disbursements journal. If the
bank account reconciles at that point, I am all finished with the reconciliation. If it does
not, I search for deposits in transit, checks from the beginning outstanding check list
that still have not cleared, other reconciling items, and bank errors until it reconciles. In
most instances, I can do the reconciliation in 20 minutes.”

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