What to inspect before signing off a bank reconciliation

Open the actual bank statement for the account and period being approved. Check the legal account holder, account suffix, currency and closing date against the reconciliation. Then agree the statement balance used in the working paper. A perfectly calculated reconciliation for the wrong account or date does not establish the intended cash balance.

Check the opening balance against the prior approved reconciliation and identify changes since that review. Xero's guidance notes that an incorrect opening balance or errors in imported statement lines can cause its statement balance to differ from the actual bank. That is why a software status alone should not replace comparison with the external statement.

For each material outstanding item, ask what event it represents and which document supports it. A check should identify the payment and payee; a deposit should point to a receipt and deposit instruction; a transfer should identify the other account. Labels such as timing and pending need enough detail to explain why the bank and ledger differ.

Inspect age and subsequent settlement. An item that clears shortly after the cutoff may have a straightforward explanation. An item carried for several periods needs an investigation owner and evidence of follow-up. Small recurring items can reveal a systematic import or classification problem even when their combined amount is not large.

Check whether positive and negative exceptions offset each other. Two unrelated errors totaling zero still require correction. The reviewer should understand the gross outstanding population, not only the net difference presented at the bottom of the schedule.

Review journals posted directly to the bank account during the close. Ask for the supporting document, reason and approval, particularly when an entry uses a reconciliation-difference or suspense account. Confirm that the adjustment addresses an identified event and does not duplicate a transaction already recorded through payables, receivables or an import.

Follow unusual transfers, large round amounts and payments outside the normal run to their source records. The review is not a full investigation of every transaction, but exceptions should be selected deliberately based on the company's activity and risks. Do not treat a familiar counterparty name as sufficient explanation for an unusual amount.

If another person prepared the reconciliation, record questions and their resolution. A correction should be visible in the final version, with the supporting explanation retained. Replacing the file without a change record makes it harder to establish what the reviewer actually approved.

Save the reconciliation report, statement and outstanding-item schedule together. Identify the preparer, reviewer and review date. State whether unresolved items remain and who will investigate them. A conditional approval should describe the condition rather than leave a generic approved status that later readers may interpret as full resolution.

Check that the closing cash balance reaches the financial statements correctly and that any restrictions or classification questions have been passed to the accountant. Reconciliation proves agreement of records within its scope; it does not by itself establish that every dollar is available for discretionary spending.

At the next close, begin with the prior exceptions and changes to reconciled transactions. That follow-through makes the signoff useful: the review produces accountable actions and preserved evidence, with outstanding items carried deliberately until they are resolved.