Your firm is the auditor of SotaTale Era Ltd and you are auditing the financial statements for the year ended 31st December 2019. The company has a turnover of $5 million and a profit before tax of $300,000. The company has supplied you with the following bank reconciliation at year end. You have entered the 'date cleared' on the bank statement (the date on which the cheques and deposits appeared on January's bank statement. $ $

Balance as per bank statement at 31st December 2019 19,730)

Add Outstanding deposits:

CJ Date Type Date Cleared

31-Dec ARL 4-Jan 22,728

24-Dec CS 4-Jan 1,306

27-Dec CS 5-Jan 470

28-Dec CS 6-Jan 630

29-Dec CS 7-Jan 852

31-Dec CS 8-Jan 1,428

31-Dec CS 11-Jan 724 28,138

Less Outstanding cheques:

CJ Date Chq # Type Date Cleared

29-Dec 6123 CP 4-Jan 2,432

30-Dec 6124 APL 18-Jan 20,624

30-Dec 6125 APL 19-Jan 22,528

30-Dec 6126 APL 18-Jan 19,464

30-Dec 6127 APL 20-Jan 30,622

30-Dec 6128 APL 21-Jan 17,342

30-Dec 6129 APL 19-Jan 25,738

30-Dec 6130 APL 21-Jan 18684

30-Dec 6131 CP 4-Jan 1,928 159,362

Balance as per cash at bank at 31st December 2019 (150,954)

Notes:

o 'CJ Date' is the date on which the transaction was entered into the cash journal.

o Type of transaction: ARL (accounts receivable receipts); CS (receipt from cash sale); APL (accounts payable payment); CP (cheque payment for other expenses)

o All cheques for accounts payable payments are written out at the end of the month.

Required:

a) List and explain the matters that cause you concern on the client's bank reconciliation. Use illustrations wherever applicable.

b) Describe all the necessary investigations that you will carry out on these items. Provide examples of separate investigations for each of the matters of concern.

c) Explain what adjustments to the financial statements would be required from (a) above. Show all workings for any figures derived.