Audit Response

Security Bank outstanding checks which are considered stale: Per matching principle, I don’t
think reversing the original entry is the appropriate accounting for stale dated checks because by
doing so (debit Cash account for the amount and credit the account that was originally debited, let’s
say expense account), would result to a lower expense account this school year and not on the
school year the expense was incurred and recorded or when the related revenue of that expense
was generated. Ideally, a liability account should be set-up for checks outstanding for a long period
of time. An adjustment on the liability account should be made every time checks previously lodged
on that account is presented for encashment. Checks will be replaced by new one especially with
the new bank policies on new check format. There was a time that we were instructed by the
external auditor to close all outstanding checks issued 6 months before May 31 to Outstanding
Checks Payable account. But for the last 3 audits, they no longer required us except for unreleased
checks with material amounts.

Cleared checks not reflecting in SL: Sorry for the misleading description/heading. Mostly of these
checks are reflected as deduction in the subsidiary ledger. It is just that, aside from the check
number, there’s no enough proof or evidence as to what CV’s these disbursements in our bank
account are to be matched or what CV’s it belong in our system/books in preparing the monthly
bank reconciliation. Take the disbursement last May 5, 2017 as example, there was check
encashment made and the bank provided the amount and the check number, which is
check#146745, as narrative. Under the old accounting system, by using the Transaction Inquiry
command, we can know the date, check voucher, payee or payees by using the check number as
reference. But try to find using 146745 as reference, there would be no result found. After
examining CV 10751, I found out that there were 2 checks issued on this particular voucher but
what was encoded under the check no. column was only 146744. That’s one of the many reasons
why I chose to temporarily treat those amounts as recon item, rather than to deal with 20 or more
cleared checks not reflected in SL per month which would results to the delay of the bank
reconciliation. After all, it doesn’t affect the adjusted balance of the bank reconciliation. The total
amount of 1,710,955.79 is now decreased by 555,254.79 in June 2017 bank recon. Hopefully, these
flaws will be eliminated under the new accounting system.

Variance in the amount per Bank in the reconciliation versus the confirmed amount: The
variance is due to error on the part of the bank. The amount 137,959.12, which the bank confirms,
is as of April 30, 2017(See attached copy of Landbank passbook).

Variance in the amount per Bank in the reconciliation versus the confirmed amount: Same
with Landbank, there was error on the part of the bank. What the the bank confirmed was as of May
30, 2017.(See attached copy of Philtrust passbook).

Phernet outstanding checks which are considered stale: To be discuss with Mam Nita