Does anyone have bank reconciliations reviewed. ALL our G/L reconciliations are required to be reviewed monthly by someone independent of this function. As auditor, I have concerns that the person assigned to do these reviews may not be experienced enough to note any deficiences, also noted that because of the volume of accts to review, none have been done since March. The only excuse offered was really busy with other duties. Could this requirement be outdated?

I don't know if it is outdated, - that's a SOX question.

I do know that we uncovered a defalcation when reviewing the reconciliations - the VP in charge of the department would have an open item. If not found in a timely manner, she would take out a salary advance for a similar amount (if in even $100's). Before the end of the month when salary advances were reconciled by HR, she would debit the due-from bank and credit salary advances, wiping it out. We found it by tracing all the clearing items - the one going to a salary advance account just did not make sense.

When found, she admitted doing it for a few years to help out her 30+ year old kids living with her. Because of the nature of the offense, she was immediately terminated and by the terms of the pension agreement, she lost her pension. Total amount taken - a little less than $15,000. Her pension plan loss - over $250,000. Age 1 month shy of retirement at 62 and a 35 year employee. (Yes, it was harsh, and the auditor and president broke down after it was over. The terms of the pension were that there could be no breaches of fidelity for the termination/departure.)

Due from bank recs are one of the most common places to hide defalcations. They need to be completed regularly, and reviewed by an experienced employee who knows what to look for.

I think you need to sit down with your Controller/CFO and establish expectations and controlls. Every reconcilation prepared should be reviewed and approved (in a timely manner). If a reconcilation is not going to be reviewed and approved it is worthless. Every reconciliation performed at our bank is required to be reviewed and approved. This would include the numerous daily reconciliations prepared. I would assume your Controller/CFO has a document which lists the reconciliation frequency of your general ledger accounts.

Monthly would not be acceptable at my bank. Not reviewing from March thru August at all would be grounds for someone being terminated. This is very important, and as others have noted, an area where many "issues" are hidden. I would say you need to reconcile and review the recs daily, and that they need to be reviewed by someone who does not prepare them BUT it must be someone who definitely knows what to look for. And I would go over that backlog ASAP even if it means asking an outside auditing firm to help you out. Very scary that nearly 6 months of activity has never been reviewed.

thanks to each of your for the input, and experiences.