A possible intentional overstatement of cash may be covered up by omitting large balance-outstanding checks from the bank reconciliation.

Question

Quizplus · Accepted Answer

Omitting large balance-outstanding checks from the bank reconciliation would result in an intentional overstatement of cash. This is because the outstanding checks represent checks that have been issued by the company but have not yet cleared the bank, meaning that they have not yet been deducted from the company's bank account. If these outstanding checks are not included in the bank reconciliation, the company's cash balance will appear higher than it actually is, giving a false impression of the amount of cash available.

A Possible Intentional Overstatement of Cash May Be Covered Up