Your firm is the auditor of Thai Textiles Ltd. and you are auditing the financial statements for the year ended June 30, 2020. The company has sales of $2.5 million and a before-tax profit of $150,000. The company has supplied you with the following bank reconciliation at year end. You have entered the “date cleared” on the bank statement (the date on which the cheques and deposits appeared on July’s bank statement).

Required

a. List the matters that cause you concern on the client’s bank reconciliation. Describe the investigations that you will carry out on these items.

b. Explain what adjustments to the financial statements would be required from part (a).

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Balance Per Bank Statement at June 30, 2020 (9,865) Add: Deposits not Credited CJ date Type Date cleared July 4 July 4 June 30 ARL 11,364 June 24 653 CS June 27 July 5 235 June 28 July 6 315 June 29 426 July 7 June 30 July 8 714 June 30 CS July 11 362 14,069 Less: Uncleared Cheques CJ date Cheque no. Type Date cleared 2163 June 29 CP July 4 1,216 June 30 2164 APL July 18 10,312 2165 June 30 APL July 19 11,264 June 30 2166 APL July 18 9,732 July 20 July 21 July 19 June 30 2167 APL 15,311 2168 June 30 APL 8,671 June 30 2169 APL 12,869 June 30 APL 9,342 2170 July 21 June 30 2171 July 4 CP 964 (79,681) (75,477) Balance per cash journal at June 30, 2020 Notes • "CJ date" is the date on which the transaction was entered into the cash journal. • Type of transaction: ARL (accounts receivable receipt); CS (receipt from cash sales); APL (accounts payable payment); CP (cheque payment [for other expenses]). All cheques for accounts payable payments are written out at the end of the month %24 %24 %24