Bank Reconciliation Statement: A Dark Horse Approach of Fraud Prevention and Internal Control

Account reconciliation is a critical activity for a business, for it allows for the detection of fraudulent activity and the prevention of errors in financial statements. A reconciliation control is by definition detective in nature, detecting fraud, errors, and missing items.

One of the key concepts of reconciliation for any business is reconciling bank balance with that of books of accounts. For any business, the primary objective of bank reconciliation is to ensure that the recorded balance in books and the recorded balance in the bank match. Additionally, it assists in managing and monitoring the cash flow. Thus, by comparing the monthly statement received from the bank to the company’s internal accounting, bank reconciliations ensure that data between bank records and a business’s internal financial records are accurate and matching.

A conducive bank reconciliation system enhances the operational efficiency of financial reporting and helps prevent and detect frauds and errors in the disbursement system. This is largely important. Corporate funds can be easily embezzled, identifying the flaws in the payment disbursement system. A bank reconciliation is the system of reporting that compels a fraudster to think twice before initiating any malicious step against the organization for that he knows that the bank reconciliation will reveal not only the payments to fictitious vendors but also the fraudulently inflated payments to legitimate vendors and third parties.

A bank reconciliation is a critical control for many businesses, ensuring that data between bank records and a business’s internal financial records are accurate.

To Read The Full Story Click Here