MCQ of the day- As a Central Statutory auditor of KG Ltd.

MCQ of the day-

As a Central Statutory auditor of KG Ltd. for the year 2018-19 you need to verify the bank balances
for the half year ending 30th September 2018. The company is holding Bank accounts in five
different banks, but you found that the bank reconciliation is not complete for some of the bank
accounts. When discussed with the management they explained that the number of transactions
in these accounts is very huge on daily basis and there are some old entries (existing in the
reconciliation statement from the year 2008 and they are not material in nature) so it is difficult to
reconcile these bank accounts. As a Central Statutory Auditor what will be your decision:

a) The unusually old outstanding entries, as are not material in nature, should be removed from
reconciliation statement and the balance in books of accounts should be considered as the
balance for the balance sheet purpose.

B) The auditor should confirm the appropriateness of the old outstanding entries by taking bank
confirmations for the same to reduce audit risk and obtain a management representation
letter on pending reconciliation.

C) The auditor should disclose the matter in Notes to accounts of the audit report with respect
to incomplete bank reconciliation.

(d) The auditor should communicate it to those charged with governance as deficiency in
internal control.