All 26 Bank Reconciliation questions
More in Bank Reconciliation
What documents are needed to perform a bank reconciliation? What does 'reconciling item' mean? What are the steps to prepare a bank reconciliation? Which differences require an adjustment to the cash book and which do not? What causes a bank reconciliation not to balance and how do you investigate? How do bank errors feature in a reconciliation? How do you reconcile when starting from the cash book balance instead of the statement? What is the correct order: update the cash book first or reconcile the statement first? How does electronic/online banking change the reconciliation process? How do you treat interest received and charged in the reconciliation?
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Bookkeeping › Bank Reconciliation

How does a bank reconciliation help detect fraud or error?

Intermediate

Answer

By independently comparing the business's records to the bank's, a reconciliation surfaces unauthorized withdrawals, altered or forged cheques, unrecorded transactions, and posting errors as unexplained differences. Performing it regularly, by someone independent of cash handling, is a key control against misappropriation.
Real-world example An unexplained debit on the statement, revealed by the reconciliation, uncovers an unauthorized standing order set up fraudulently.

Common follow-ups: Why should an independent person reconcile? | What fraud signs might appear?

Cash Book & Petty Cash Correcting Errors Bank Reconciliation
All 26 Bank Reconciliation questions