How to Prepare Bank Statements for Audit

Auditors examine bank statements to verify cash balances and transactions. Proper preparation makes the audit smoother and faster.

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What Auditors Look For

Auditors use bank statements to:

• Verify cash balances on financial statements
• Test transactions for accuracy and validity
• Check reconciliations are performed correctly
• Identify unusual activity that may need explanation
• Confirm controls are working

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Documents to Prepare

1. Bank Statements

• All statements for the audit period
• All accounts (checking, savings, money market)
• Complete statements including all pages
• Original format preferred (PDF from bank)

2. Bank Reconciliations

• Monthly reconciliations for each account
• Signed/approved by preparer and reviewer
• List of reconciling items explained

3. Supporting Documents

• Canceled check images
• Deposit slip copies
• Wire transfer confirmations
• ACH authorization records
• Bank fee documentation

4. Account Information

• List of all bank accounts
• Authorized signers
• Account opening/closing documentation

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Organization Best Practices

Folder Structure

Audit Package - Bank Statements/
├── Account Summary Schedule
├── Chase Checking xxx1234/
│   ├── Statements/
│   │   ├── 2026-01 Statement.pdf
│   │   ├── 2026-02 Statement.pdf
│   │   └── ...
│   └── Reconciliations/
│       ├── 2026-01 Reconciliation.pdf
│       ├── 2026-02 Reconciliation.pdf
│       └── ...
├── Chase Savings xxx5678/
│   ├── Statements/
│   └── Reconciliations/
└── Supporting Documents/
    ├── Wire Transfers/
    └── Large Deposits/

Naming Convention

Use consistent naming:

• AccountName_YYYY-MM_Statement.pdf
• AccountName_YYYY-MM_Reconciliation.pdf

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Creating a Bank Account Summary

Provide auditors with a summary schedule:

This should tie to your balance sheet.

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Reconciliation Requirements

Each reconciliation should show:

Bank Balance per Statement (01/31/2026):     $75,000.00

Add: Deposits in Transit
  01/31 Customer payment                      $5,000.00
                                              $5,000.00

Less: Outstanding Checks
  Check #1234 - Vendor A                     ($2,500.00)
  Check #1235 - Utilities                      ($500.00)
                                             ($3,000.00)

Adjusted Bank Balance:                       $77,000.00

Book Balance per GL (01/31/2026):            $77,000.00

Difference:                                       $0.00

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Handling Common Audit Requests

"Provide bank confirmations"

Auditors may request direct confirmation from banks. You'll need to:

• Complete bank's confirmation form
• Authorize release of information
• Allow 2-4 weeks for response

"Explain this large transaction"

Be ready to explain:

• Large or unusual deposits
• Round-number transfers
• Year-end transactions
• Related party transactions

Prepare documentation proactively.

"Show me the reconciliation for December"

Have reconciliations:

• Completed within 30 days of month-end
• Signed by preparer
• Reviewed and approved
• With supporting documentation attached

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Red Flags Auditors Watch For

Avoid these issues:

• Unreconciled accounts - Major audit concern
• Stale outstanding checks - Items over 90 days
• Unexplained adjustments - Book-to-bank differences
• Missing statements - Gaps in records
• Altered documents - Never modify originals
• Large year-end transactions - May be scrutinized

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Converting Statements for Analysis

Auditors may want data in Excel for testing:

1. Convert PDF statements to Excel
2. Combine all months into one file
3. Add columns for auditor notes
4. Sort by date, amount, or description

This facilitates audit sampling and testing.

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Timeline for Preparation

2-4 Weeks Before Audit

• Confirm audit date range
• List all bank accounts
• Gather all statements

1-2 Weeks Before

• Complete all reconciliations
• Organize files
• Prepare summary schedule
• Identify unusual items to explain

Day Before

• Final review of package
• Check for missing documents
• Prepare explanations for known questions

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Working with External Auditors

Provide Access Efficiently

• Secure file sharing (not email for sensitive docs)
• Clear folder organization
• Quick responses to follow-up requests

Anticipate Questions

Prepare explanations for:

• Large transactions
• Related party items
• Year-end timing
• Account changes

Document Everything

• Keep notes of auditor requests
• Track items provided
• Document responses given

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Digital vs. Physical Records

Digital Advantages

• Searchable
• Easy to share
• Takes less space
• Harder to lose

When Physical Needed

• Some auditors prefer paper
• Signature verification
• Original document requirements

Best practice: Maintain digital with ability to print.

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Summary

Preparing bank statements for audit requires organization, completeness, and documentation. Gather all statements and reconciliations, organize chronologically by account, prepare supporting schedules, and be ready to explain unusual transactions. Good preparation leads to faster, smoother audits.