Records, reconciliations and accountants' reports — SQE1 Accounts question
A worked single-best-answer question on records, reconciliations and accountants' reports, with why each wrong option is wrong — the way SQE1 traps candidates.
Marlow Solicitors has a single client account. Its cashier carries out a reconciliation every two calendar months, comparing the bank statement balance with the client cash book balance. The cashier keeps the reconciliation on file but no one else reviews or signs it. The firm's new compliance officer for finance and administration (COFA) asks whether this complies with the SRA Accounts Rules.
Which of the following best describes what the Rules require?
- AMonthly reconciliations prepared and signed by the cashier are sufficient.
- BA reconciliation at least every five weeks of the bank statement balance with the cash book balance and the client ledger total, signed off by the COFA or a manager of the firm.
- CA reconciliation once a year, before the accountant's report is obtained.
- DA reconciliation at least every five weeks of the bank statement balance with the cash book balance only.
- EA reconciliation at least every five weeks, signed off by the firm's external reporting accountant.
Show answer and reasoning
Rule: At least every five weeks, the bank statement balance, cash book balance and client ledger total must be reconciled and signed off by the COFA or a manager.
- A Reconciliations must be signed off by the COFA or a manager; a cashier's signature is insufficient. (wrong rule)
- C Reconciliations must be carried out at least every five weeks, not annually. (wrong rule)
- D The reconciliation must also include the total of the client ledger balances. (wrong rule)
- E Sign-off must be by the COFA or a manager of the firm, not by the external accountant. (wrong rule)
Source: SRA Accounts Rules 2019, rr 8.2 and 8.3