Skip to content

CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

While auditing bank reconciliations of Sundaram Foods Pvt Ltd, the internal auditor notices several cheques issued in March that remained uncleared in the bank statement for over six months. Which audit step is most appropriate?

The auditor should review the aged outstanding cheques, identify stale ones beyond validity, and confirm that management follows up, reverses or reissues them with authorisation. Treating them as normal or writing them off without approval would leave the reconciliation misleading and control weak.

  1. AIgnore them because uncleared cheques are always normal
  2. BReview the aged outstanding cheques, check for stale or time-barred items, and verify that appropriate follow-up or reversal is madeCorrect
  3. CWrite off the cheques directly against profit without approval
  4. DAsk the bank to cancel its statement

Explanation

Cheques outstanding beyond their validity period (three months) are stale. The auditor should examine ageing, confirm reasons, and see that management reverses or re-issues them with proper authorisation. Ignoring or arbitrary write-off weakens control.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit of Specific Functions shows your real accuracy, how long you take and where you lose marks.

Practise Internal Audit of Specific FunctionsFree diagnostic mock

More Internal Audit of Specific Functions questions