Adapted AICPA Simulation
The auditor of Cubs obtained the following client-prepared bank reconciliation:
ACCOUNT 101-CASH ACCOUNT - FIRST BANK OF MUNICH
Blink Reconciliation-December 31, year 2.
Prepared by: Joe Smith, January 10, year 3
Reviewed by: Evan Monroe, March 2, year 3
Balance per bank $45,000(a)
Add deposits in transit
10/25/year 2 12,000
10/2B/year 2 10,000
Deduct outstanding checks
#28200 03/29/year 2 11,000
#9003 11130/year 2 14,000
#9004 12/01/year 2 15,000
Other reconciling items ------
Balance per bank adjusted $27,000
Balance per books before adjustments $32,500
Adjustments: bank fee and unrecorded items (5,500)
Balance per books, adjusted $27,000 (b)
(a) Agreed balance per bank to online account balance as of Jan 3, year 3
(b) Agreed to general ledger on Jan 1, year 3
The auditor for Cubs Co. Has obtained the client-prepared bank reconciliation.
The following information is available:
-Evan Monroe was promoted to controller on December 15.year 2; his former position was assistant controller-fixed assets.
-Evan Monroe has his personal bank accounts with First Bank of Munich.
-Joe Smith was hired on December I , year 2, as a staff accountant Joe Smith's prior job was with First Bank of Munich.
-Cubs expects the year-end close to be complete on January 6, year 3.
-The adjustments on the bank reconciliation were booked on January 30, year 3.
Required:
In the table below. identify six potential issues that the auditor might have when examining the bank reconciliation prepared by Cubs from the list provided of potential issues. An issue may be used once or not at all.
1. Reconciliation is not mathematically accurate.
2. Reconciliation balance was not properly agreed to the December 31, general ledger balance.
3. Reconciliation line item "Other reconciling items" is left blank.
4. Reconciliation was not reviewed in a timely manner.
5. Reconciliation was improperly approved as reviewer had a conflict of interest
6. Reconciliation has unsubstantiated unrecorded items.
7. Reconciliation contains aged items that should have been added to the bank balance.
8. Reconciliation was improperly prepared by someone with a conflict of interest
9. Reconciliation does not contain a proper title.
10. Reconciliation does not agree to the cash disbursement subsidiary ledger.
11. Reconciliation was not agreed to bank statement balance al the appropriate date.
12. Reconciliation does not include January, year 3 reconciliation items.
13. Reconciliation was not prepared in a timely manner.
14. Reconciliation was prepared by an inexperienced individual.
15. Reconciliation contains stale checks.