Hello! I am new to my employer (1 month) as their new controller, and I want to run something by other CPAs.
The company has been doing the bank reconciliation in a way that is very different from what I have been taught and done in the past. For context, I have worked in public accounting for 9 years and have had my CPA license over 7 years. They do something where all deposit details are imported to the GL as a lump sum, payroll as a lump sum, and generally most other activity as a lump sum. (AP checks are about the only exception) As these lump sums, they are compared to the lump sum of the related transactions that cleared the bank. The difference is written off to a temporary liability account and written off at year-end.
I do not like this method, and technically I did not have any training on how exactly this company likes to do the bank reconciliation (training has been very slow). As such, I used my professional experience to conduct the bank reconciliation as I saw fit (for example, using the deposit detail instead of the lump sum method, matching each transaction one-by-one). The only variance I have is about $1k and it relates to the difference between the lump-sum payroll distribution and the individual distribution amounts that cleared the bank. An additional context item is that $1k is considered immaterial because it's <1% of the total distribution for the month.
I requested reports to break down the lump-sum payroll distribution. Since this is for November, my boss is asking to have this bank reconciliation completed immediately. He does not want me to dig into it and figure out the $1k. He emphasized that since the auditors did not flag their bank reconciliation procedure, he wants things to be done the way it has always been done. Last year, the temporary liability account was written off at year-end for over $16k and was not an issue for the auditors.
My boss indicated that it was always understood that the variance represented timing differences (which it has to a certain extent) but it is never actually researched. This bothers me because I feel that this procedure is based on laziness. The bank reconciliation I am completing is perfectly capable of reconciling to a $0 variance. Is this really okay? Is this a common practice in companies with internal accounting to insufficiently reconcile accounts like this?
I would love some insight. Thank you!
The company has been doing the bank reconciliation in a way that is very different from what I have been taught and done in the past. For context, I have worked in public accounting for 9 years and have had my CPA license over 7 years. They do something where all deposit details are imported to the GL as a lump sum, payroll as a lump sum, and generally most other activity as a lump sum. (AP checks are about the only exception) As these lump sums, they are compared to the lump sum of the related transactions that cleared the bank. The difference is written off to a temporary liability account and written off at year-end.
I do not like this method, and technically I did not have any training on how exactly this company likes to do the bank reconciliation (training has been very slow). As such, I used my professional experience to conduct the bank reconciliation as I saw fit (for example, using the deposit detail instead of the lump sum method, matching each transaction one-by-one). The only variance I have is about $1k and it relates to the difference between the lump-sum payroll distribution and the individual distribution amounts that cleared the bank. An additional context item is that $1k is considered immaterial because it's <1% of the total distribution for the month.
I requested reports to break down the lump-sum payroll distribution. Since this is for November, my boss is asking to have this bank reconciliation completed immediately. He does not want me to dig into it and figure out the $1k. He emphasized that since the auditors did not flag their bank reconciliation procedure, he wants things to be done the way it has always been done. Last year, the temporary liability account was written off at year-end for over $16k and was not an issue for the auditors.
My boss indicated that it was always understood that the variance represented timing differences (which it has to a certain extent) but it is never actually researched. This bothers me because I feel that this procedure is based on laziness. The bank reconciliation I am completing is perfectly capable of reconciling to a $0 variance. Is this really okay? Is this a common practice in companies with internal accounting to insufficiently reconcile accounts like this?
I would love some insight. Thank you!