[hopefulcpa28]

….and how are they used as part of audit procedures?

https://www.dummies.com/how-to/content/how-to-check-bank-reconciliations.html is that a good explanation?

Bank reconciliation is done by the client, which compares bank to book balances and vise versa. Deposit in Transit is added, and outstanding checks and other bank charges are subtracted. Then auditor checks the reconciliation to the cutoff stmt (which is received from the bank) to make sure it matches. Cutoff stmt shows transactions 10-15 days after the f/s date. So if deposit in transit isn’t included in the cutoff statement, then it means it shouldn’t be included in the client’s f/s either.

Am I right?

[Anonymous]

@ hopeful

I'm an auditor and the difference is that the bank recon is prepared by the client whereas the cut-off statement is from the bank. Also, the bank recon is as of a point in time (e.g. 12/31/11) whereas the cut-off statement are transactions for a period of time (e.g. 1/1/12 – 1/31/12). In reality, we don't use a “cut-off statement”…instead, just the subsequent month's bank statement, but same idea.) It's not true that everything on a “cut-off statement” should be on the bank recon. We make selections from the “cut-off statement” to determine whether deposits / checks are properly included / excluded from the reconciliation. For example, let's say we pick a check that cleared the bank on 1/15/12 in the cut-off statement. We'll request the check and if the check was dated before 12/31/11, it should be included on the recon as an Outstanding Check. If it was dated after 12/31/11, it should not be on the recon as an Outstanding Check.

[hopefulcpa28]

Perfect. Thank you so much!! Really really appreciate it!!!

[Author]

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