Reference no: EM132920678

The owner of Auusie Ltd has completed a bank reconciliation and cannot get the bank's records to agree with the cash records of his business. He concludes that internal control has somehow failed and cash is being misappropriated. He asks you to check the records and confirm or otherwise his suspicions. He supplies the reconciliation statement at the end of last month, his cash records, and the most recent bank statement.

Last month's reconciliation statement is presented below:

Bank Reconciliation Statement As at 31 May 2016
Balance per bank statement 30 April 2016 $ 4,328.90 CR
Add: Outstanding deposit $ 1,224.50
$ 5,553.40
Less: Unpresented cheques $ 223.70
Balance per Cash at Bank account at 31 May 2016 $ 5,329.70 DR

• The total of the cash receipts journal for June is $64,776.30 and the total of the cash payments journal is $63,265.60. The current bank statement shows that cheques presented and paid amount to $59,725.10, and total deposits amount to $64,780.60. There are also additional debits on the statement for a dishonoured cheque for $210, and account fees for $20. An examination of the records reveals that all reconciling items at 31 May 2016 appear in the bank statement for June, Unpresented cheques at 30 June total $7,154.40, and the 30 June deposit of $1,950.40 has not been credited by the bank. Your check of the cash journals reveals that addition errors have been made by the clerk responsible. Receipts should total $65,766.30 and payments should total $63,185.60.

Required:

Problem 1. Recalculate and present the general ledger Cash at Bank account balance as it should be at 30 June 2016.

Problem 2. Prepare the bank reconciliation statement at 30 June 2016.

Problem 3. Advise the owner of Aussie Ltd, how much cash is being misappropriated, assuming that the records maintained by the bank are accurate.

Problem 4. Identify two ways in which reconciliation exercise can be used as a tool to detect and prevent Fraud.