alleryWhy is regular bank reconciliation considered an internal control tool?
AIt deters embezzlement and fraud
BIt boosts interest income amounts
CIt avoids paying any bank charges
DIt increases customer goodwill totally
Answer & Solution
Correct answer: A. It deters embezzlement and fraud
1. Regular BRS surfaces unrecorded deposits, unexplained withdrawals and entry errors.
2. Many embezzlement cases were caught precisely because reconciliation was forced periodically.
3. Hence BRS acts as an internal control mechanism that deters fraud.
4. It does not boost income, avoid charges, or build goodwill on its own.
_Source: ICAI BoS Foundation Paper 1, Ch 3 "Bank Reconciliation Statement", §5 (iii)_
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