Page 265 - DMGT104_FINANCIAL_ACCOUNTING

Unit 11: Bank Reconciliation Statement

Notes

Task On December 31, 2006, the cash book of the M/s Mona Plastics shows the credit
balance 6,500. Cheques amounting to 3,500 deposited into bank but were not collected
by the bank. Firm issued cheques of 1,000 which were not presented for payment. There
was a debit in the pass book of 200 for interest and 400 for bank charges. Prepare Bank
Reconciliation Statement.



Caselet Probe Blames Lack of Internal Controls

n independent legal counsel appointed by IT major Wipro has found that lack of
internal controls led to the embezzlement committed by one of the former junior
Aemployees between November 2006 and December 2009.
The legal counsel submitted the probe report last week to the audit committee set up to
investigate the fraud early.

Based on the findings of the legal counsel, Wipro said that if corrections were to be carried
out to the annual financial results of the company in view of the “misstatements identified
during the probe together with other “uncorrected audit adjustments’’, profit-after-tax for
2009-10 would have been higher by 2.1 per cent (approximately 92 crore). Wipro’s Chief
Financial Officer, Mr Suresh C. Senapaty, told Business Line that the external legal counsel
was appointed on the advice of the SEC. “He formally submitted the report this month
and measures have already been taken to tighten the system,” he said. Stating that it has
been able to recover most of the embezzled amounts, Wipro, which is listed on the New
York Stock Exchange, in its latest disclosure to the US Securities and Exchange Commission,
said its audit panel has concluded that mistakes were committed in certain accounting
entries and that they were also not supported by any documents. “We and our independent
registered public accounting firm also identified the lack of internal controls that gave
rise to the embezzlement and financial statement misstatements as material weaknesses
in internal control over financial reporting,” Wipro said in its disclosure to SEC. The
material weaknesses related to sharing of online banking access passwords and Wipro’s
internal accounting system passwords by certain employees within the finance and
accounting departments including those responsible for external financial reporting.
There was lack of effective controls over recording of journal entries, including inadequate
documentation which resulted in ineffective controls over bank reconciliation statements,
exchange rate fluctuation accounts and outstanding liabilities accounts and also there was
lack of timely and adequate reconciliation and review of period and end reinstatement of
foreign currency inter-company and unit balances, including recording of appropriate
adjustments. Also, segregation of duties with respect to recording and initiating banking
payments was found insufficient.
Source: http://www.thehindubusinessline.in/2010/11/17/stories/2010111753810100.htm

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