Bank Reconciliation Statement (BRS)
Bank Reconciliation Statement (BRS)
Importance of Bank Reconciliation Statement (BRS)
Whenever we are requested to quote for accounting, audit, tax, or any other financial services, one of the main questions we ask is whether the client’s books are reconciled. If the books are not reconciled, their records are incomplete and possibly inaccurate, and we will be providing our advice on unreliable data. If the data is not reliable, it increases both our workload and risk, given our position as a leading audit firm in Dubai and across the UAE.
Client Background
Client is in the Digital Ticketing & Travel sector. They are registered with Sharjah Media City and their primary market is the Kingdom of Saudi Arabia (KSA). They are partnered with several airlines and hotels operating in the KSA. Customers use their platform to book tickets and hotels in favorable prices.
The Challenge in Bank Reconciliation (BRS)
Client approached us for external audit services from 2022 till 2024 (3 years). As always, we enquired about the status of their bookkeeping. They informed us that their books have not been maintained since the beginning and banks are never reconciled. They are required by law to submit their audited financial statements to the Sharjah Media City free zone within 2 months to comply with the final deadline.
The client uses a payment gateway to receive customer payments online. The merchant settles the payments received on behalf of our client once every week. The merchant deducts the agreed commission from the weekly sales and transfers the net aggregated amount to our client’s bank account. Our client receives 1 weekly payment against a number of sales invoices. This means a sale recorded through the ticketing portal does not have a corresponding receipt in the bank with the same amount.
Our Solution to the BRS Challenge
We allocated two teams to this assignment, audit and accounting services team, both reporting to two different engagement partners to comply with the International Auditing Standards.
We obtained the bank statements from inception of the business along with the supporting documents of debits and credits (wherever possible) from the client.
We contacted all the service providers and obtained statement of accounts from them. We could not obtain statement of accounts from customers as all of them were retail customers.
We recorded all the supplier invoices in Quickbooks accounting software. Using the bank statements and supplier statement of accounts, allocated the payments to those invoices to close the relevant payables account. This exercise left us with unpaid supplier invoices which we counter checked and reconciled with supplier records.
Most of the customer payments were made weekly in bulk by merchant. On the other hand, the ticketing portal provides sales transaction wise report. Hence, none of the individual sales had a corresponding credit with the same amount in the bank statement. Client was not aware that the merchant provides a settlement report every time a payment is transferred by the merchant. This report provides complete details of the individual sales invoices, commission deducted by merchant, and the net aggregated payment transferred to customer.
We downloaded the yearly sales report from the client’s ticketing portal and all the settlement reports from the merchant’s portal.
We then matched and reconciled the sales data as per the ticketing portal with the sales data reported in the merchant’s portal.
We verified the commission expense on sample basis with the merchant agreement and recorded the commission expense payment in our books.
Allocated the aggregated weekly payments received from the merchant to the individual sales invoices.
Lastly, we recorded all the required year-end journal entries and started the audit.
Results and Client Feedback
We completed the accounting of our client with utmost accuracy and professionalism. The books were handed over to the audit team of our firm who conducted the audit and provided the audited financial statements to the client. The client was enormously satisfied with our service and the outcome of our work. We have built a relationship of trust and reliability with our client which we shall always uphold and respect.
