ACCA Applied Knowledge · Business and Technology · Internal controls
At Kestrel Ltd, a finance clerk compares the monthly bank statement with the cash book and investigates every unreconciled difference. How is this control best classified?
A bank reconciliation is a detective control. It is carried out after transactions have been recorded and highlights differences between the cash book and bank statement, revealing errors or irregularities that have already occurred. It does not stop them happening and does not by itself correct them.
- APreventive, because it stops cash being stolen
- BDetective, because it identifies errors or irregularities after they have occurredCorrect
- CCorrective, because it automatically fixes the differences
- DDirective, because it tells staff what to do
Explanation
A bank reconciliation is performed after transactions have been recorded and reveals differences such as errors or unauthorised payments. It therefore detects problems rather than preventing them. It does not itself correct them; adjustments follow separately, so corrective is wrong.
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