Banking · Bank Auditing and Financial Reporting
An auditor reviewing a bank branch loan portfolio notices that several large overdue overdraft accounts are credited with significant sums from a 'Suspense Account' on March 31st and reversed on April 2nd. The manager explains this was to temporarily reduce overdue status for year-end reporting. How should the auditor classify this practice and report it?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1This is a clerical reconciliation error that should be corrected internally without auditor reporting.
- 2Since it was reversed after the balance sheet date, it is an 'Adjusting Event' requiring no reporting.
- 3This is 'Window Dressing', a fraudulent practice to misrepresent financial health, and must be reported in the LFAR and main report.✓
- 4This is a standard practice of 'Liquidity Management' and should be highlighted as an efficiency.
Correct answer
This is 'Window Dressing', a fraudulent practice to misrepresent financial health, and must be reported in the LFAR and main report.
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