I do annaul tax prep for a profitable company. To make a long story short, a company's cash balance per books does not reconcile to the bank statement. The company provides a computer generated reconcilation, prepared a few days after the end of the year. Usually it is a simple matter to subtract out the few January amounts to arrive at a reconciled year end balance. Not this year. Cash on the books is short by $5K+.
Multiple emails were sent to the company bookkeeper asking for assistance to resolve the problem. Mostly, those emails were ignored. She would only say that her numbers do reconcile, and the the problem is a check dated December 8 that was not cashed until January 14. That check is not on the bank reconcilation. I asked the bookkeeper to explain this. Since she claims to be in balance, I asked her to provide a reconcilation as of 12/31 that clearly shows the bank statment reconciles to the cash balance shown on her financial statements. She did not respond to either request.
There is another problem. The computer generated reconcilation shows a begnning bank statement balance. This is the ending bank statement balance from the prior month. It does not match what is shown on the bank statement as the starting bank balance for the month. The bookkeeper made a credit adjustment on the books in the current month to correct the balance error.
I think the problem in the curent month is that the December 8 check was a backdated check. That by itself is not such a big deal, but combined with the error in the bank balance for the prior month, the whole thing makes me uneasy.
I notified management of the problem and basically punted it back to them. I made it clear that it is their responsiblity to deal with this. I also mentioned that bank reconciliation failures can be a sign of problems in a company's system of internal control.
So far, so good. But it has left me wondering. What is going on here? There are two long time employees who have the ability to prepare checks for signature and make entries in the accounting system, as well as the two company owners. I have worked with this company for 15+ years and the owners are usually very straight arrow about their accounting practices. The bookkeeper is not the easiest person to work with, but there mostly haven't been any issues previously. Has anyone seen anything like this?