How often should bank reconciliations of checking accounts be performed for effective internal control?

Performing bank reconciliations of checking accounts on a monthly basis is critical for maintaining effective internal control. Monthly reconciliations ensure that any discrepancies between the bank statement and the company’s books are identified and addressed promptly. This practice helps in detecting errors or unauthorized transactions in a timely manner, reducing the risk of financial loss due to fraud or accounting mistakes. Regular monthly reviews also promote accuracy in financial reporting and enhance the organization’s ability to make informed financial decisions based on up-to-date and reliable data.

While performing reconciliations less frequently, such as quarterly, annually, or bi-annually, may be less labor-intensive, it increases the risk of undetected errors accumulating over time, which can lead to larger discrepancies and more complicated resolutions later on. Monthly reconciliations strike a balance between thoroughness and timeliness, making them best practice for effective financial oversight.