How is a bank reconciliation audited or reviewed?

What does checking a reconciliation prove that preparing it did not?

The Washington State Auditor's guide Best Practices for Bank Reconciliations, written for local governments, describes a reconciliation as comparing ending cash balances per the bank records with the general ledger. Preparing one shows the preparer could explain the gap between two figures from records they chose. Checking asks what preparing cannot: are both figures genuine, is each reconciling item real and clearing, does everything on the statement belong in the books, were identified corrections posted, and did someone independent do the work on time?

The same guide warns that it is not enough to merely reconcile numbers; the activity must be read and understood. A reconciliation can agree to the cent while the statement shows a payment nobody authorized, because that payment was recorded in the books too. Preparing a reconciliation, or finding why one will not balance, stays with the preparer.

Which evidence must you obtain yourself?

Obtain these four items yourself, never through the preparer:

• The period-end bank statement. Get it by a route the preparer cannot touch, using your bank's own process, for example online read-only access, which the Washington guide suggests so overseers can check an account independently. Ask your bank what it offers.
• The next period's statement. Obtained the same way, it shows whether the reconciling items cleared.
• The ledger balance. Run the cash account report for the statement date yourself.
• Last period's reviewed reconciliation. Take it from your own file.

The PCAOB's audit-evidence standard, AS 1105, written for auditors, gives general rules for weighing evidence that apply here too: in general, evidence obtained directly is more reliable than evidence obtained indirectly. It also ranks evidence from a knowledgeable source independent of the company above evidence from internal sources only. A statement that reached you through the preparer is indirect evidence controlled by the person being checked; if it was altered, every later step will agree with it.

The Washington guide tells the reviewer to read the bank statement they obtained directly from the bank and compare it with the one used in the reconciliation; any difference is an exception in itself.

What does a reviewer's procedure list look like?

Each check names its evidence, who obtains it, the expected result and the exception it raises:

The PCAOB's AS 1105 defines reperformance as the independent execution of procedures or controls originally performed by company personnel, and recalculation as checking the mathematical accuracy of information; both go beyond reading. The Washington guide suggests a policy may require the reviewer to verify reconciling items, periodically reperform the reconciliation, or both.

Book-side items are corrections the books still need: in the Washington guide's example, bank fees and interest found on the statement are posted back to the period they relate to. Suppose the adjusted bank balance is 16,810.00 (statement 18,420.00, plus deposits in transit 2,150.00, less outstanding checks 3,760.00) and the adjusted book balance is the ledger's 16,845.00 less an unrecorded 35.00 fee, also 16,810.00. Run the cash account report at the statement date: it should read exactly 16,810.00. At 16,845.00 the fee was not posted to the period; at 16,775.00 it was posted twice, for example by hand and again from the bank feed.

What clears each class of reconciling item?

The Washington guide says all reconciling items should have support and most should clear on the next month's statement, that any item other than bank fees or interest should be carefully evaluated and supported, and that deposits in transit should appear as actual deposits within a few days, anything longer indicating a potential theft. The guide does not list clearing evidence by class; applying its rule, each class clears as follows:

When checks clear, look at the images too: the Washington guide says to watch for forged, missing or improper check endorsements.

Which patterns across periods need a closer look?

Keep a running log with one row per reconciling item: the period it first appeared, its class and amount, and the period it cleared. An item that never clears then shows as a trend, not a fresh observation each month; the Washington guide suggests a policy set a timeframe for resolving outstanding reconciling items. Three patterns each call for a named check:

• Persistent. An item carried forward unchanged, such as a deposit in transit listed at three month-ends. A genuine one would have cleared within days, so trace it to the original receipts and establish where the money went; for an outstanding check older than your policy allows, find out why it has not cleared.

  Do not simply void or write back a check nobody has cashed. The Washington guide notes that, for its local governments, a stale-dated check qualifies as unclaimed property requiring special handling and reporting. Find out whether unclaimed-property rules apply to the business before anyone clears it.

• Recurring. A similar unexplained item or small adjustment that returns period after period. Total it across the log and treat it as one pattern, not several trivial differences.
• Round sums. The AICPA's Journal of Accountancy article "Round numbers: A fingerprint of fraud" calls an oddly high percentage of round-number entries a red flag, while noting that round numbers are also used in authentic transactions. Vouch round-sum items and adjustments to their support.

Persistence is the signal whatever the amount. None of these patterns says anything about a person; each is a reason to get evidence.

What suggests a reconciliation was forced?

A forced reconciliation is made to agree by inserting a figure, an adjustment or a fictitious item, so every check based on agreement passes it. Each signal calls for its own check:

The definition and the pairing of signals with checks are a working list, not a recognized fraud-examination list. Each signal can have an innocent explanation, such as a keying error or a bank delay; the check decides which.

Which accounts must the review cover?

Every account holding the business's cash is in scope, including payroll, savings, merchant and sweep accounts and dormant or rarely used ones. The Washington guide treats any account holding cash or investments as a bank account and advises searching for open accounts unknown to you by inquiring with your bank and possibly others about accounts under your name or federal identification number. Demonstrate coverage rather than assume it: build the account list from what the banks report and from the chart of accounts, and show a reviewed reconciliation for each account and period. For a dormant account, agree the unchanged balance to that period's statement; activity on an account everyone believes is idle is an exception.

Who reviews, how soon, and what shows the review happened?

The Washington guide calls for independent review of bank reconciliations, so the reviewer is never the preparer.

Evidence that the review happened is the reviewer's name, signature or electronic sign-off and date on the reconciliation, with notes of what was checked; an unsigned, undated review cannot be relied on later. The Washington guide suggests a policy covering whether the preparer signs and dates the reconciliation upon completion, how the reviewer obtains the statement and documents approval, the number of days allotted for completing the reconciliation after the statement arrives, and when the reviewer should complete the review; it also expects the reviewer to ensure the reconciler completed it on time. Compare both dates with the statement date and those deadlines, and record any lateness in the conclusion.

What changes when one person records, pays and reconciles?

The review is then the only independent check over cash, so steps that would otherwise be discretionary become mandatory, each performed by someone other than that person: obtaining both statements directly from the bank, reading every line, re-performing the whole reconciliation every period, vouching every reconciling item and adjustment, and checking cleared-check images and electronic payees against approved bills. The Washington guide says that if duties are fully segregated the reviewer may spot-check key items, and that where you cannot fully segregate duties you might outsource the reconciliation to someone else, such as a contracted accountant. If the owner is the only person keeping the books, nobody independent is checking; an outside accountant is the practical way to add one. Wider safeguards for this setting belong to the related question on one person recording, paying and reconciling.

What extra checks does a reconciliation matched from a bank feed need?

Software does the arithmetic, so attention moves to what the matching accepted, left out or overrode. The Washington guide advises periodically verifying that an automated reconciliation works as expected and that the application restricts user access and maintains an audit trail. In QuickBooks Online, Intuit's help pages point to four places to look:

• Auto-added transactions. Intuit's page on setting up bank rules (updated 9/11/2026) says that with auto-add on, QuickBooks applies the rule to any downloaded transaction it applies to and posts it immediately, marking such transactions with an AUTO badge. Test AUTO-badged items against the statement and their support.
• Excluded transactions. Intuit's page on excluding a downloaded bank transaction (updated 8/10/2026) says excluded items move to the Excluded tab and do not appear in any account register or financial report. Each exclusion in the period needs a reason you can verify, such as a genuine duplicate.
• Reconciliation adjustments. Intuit's page on adjusting entries for a reconciliation (updated 8/5/2026) says one creates an expense transaction if the difference is negative, or an income transaction if it is positive, and calls such entries a last resort. Treat each as a forced balance until explained.
• Changes after reconciliation. Intuit's page on fixing beginning balance issues (updated 9/1/2026) names a reconciled transaction that was edited, deleted, voided, moved or unreconciled as a cause, and says its Reconcile Discrepancy Report lists what changed, when, and who changed it. Run it whenever the opening balance differs from last period's reviewed closing balance.

Intuit's page on fixing beginning balance issues says you need admin access to view and edit reconciliations; use your own admin-level login rather than asking the preparer to run these reports. Other products label these screens differently; use that vendor's own current help.

How does a manager's review differ from an auditor's work over cash?

Depth and what you may conclude depend on your capacity:

A manager's review is part of the business's own internal control. The Journal of Accountancy's 2024 refresher on fraud and the responsibility for its detection states that the primary responsibility for fraud prevention and detection lies with the entity's management, including its system of internal control. The review is a control, not assurance: it tells the owner whether this reconciliation is supported by the evidence checked, and nobody inside or outside the business should treat it as assurance.

An audit differs in independence and evidence. In an audit under the PCAOB's standards, its confirmation standard, AS 2310, requires the auditor, for cash held by third parties, to perform confirmation procedures or otherwise obtain relevant and reliable audit evidence by directly accessing information maintained by a knowledgeable external source, and to send each confirmation request directly to the confirming party and obtain the response directly from it. That is the PCAOB's requirement, so an auditor working under it does not take the cash balance from your reviewed reconciliation; if your audit follows the AICPA's auditing standards instead, ask your auditor how cash will be confirmed. The 2024 refresher describes the auditor's aim as reasonable assurance that the financial statements are free of material misstatement, whether due to fraud or error, with an unavoidable risk that some material misstatements may not be detected.

How do you record the conclusion and handle an item nobody can explain?

Record the conclusion on the reconciliation or an attached review note: accounts and periods covered, the evidence you obtained and its source, checks performed, each exception, and one conclusion, either supported, supported once listed corrections are posted and re-presented, or not supported. Sign and date it. The Washington guide suggests your policy state whether you will allow any variance to remain unresolved. Each exception then reaches one of three ends:

The Journal of Accountancy's article "Fraud is suspected: Now what?", written for auditors, advises choosing whom to contact depending on who is suspected, never drawing conclusions of guilt or innocence, notifying only those who need to know, and advising the client to seek legal counsel about what steps to take. Applied to you, escalate to someone not involved in the item: normally the owner. If the owner or whoever oversees the finances prepared, approved or benefits from the item, go to another owner or those charged with governance instead. Record facts, not conclusions about any person; tell only those who need to know; an owner takes legal advice on next steps, and an outside accountant advises the owner to. Keep your own copies of what you obtained.

The Washington guide tells you to check your banking agreement for how quickly you must report fraud or errors, and warns that for ACH and wire transfers you have little to no window for reporting fraud, so contact the bank without waiting for the next review; handling a suspected unauthorized payment, including one made to changed bank details, is a separate question.

Carry every open exception into the log with an owner and a due date; the next review starts by confirming each reached its end.