The reason for testing the client's bank reconciliation is to verify whether the client's recorded bank balance is the same amount as the actual cash in bank, except for deposits in transit, checks outstanding, and other reconciling items. The information needed to complete the tests of the reconciliation is provided by the
A) client's records and ledgers for the year under audit.
B) cutoff bank statement.
C) client's records and ledgers for the subsequent year.
D) canceled checks for the year under audit.

Question

Quizplus · Accepted Answer

The cutoff bank statement is crucial for testing the client's bank reconciliation because it provides an independent source of information about the bank transactions around the balance sheet date, allowing auditors to verify the accuracy of the reconciliation and the existence of reconciling items such as outstanding checks and deposits in transit.

The Reason for Testing the Client's Bank Reconciliation Is to Verify