Why are bank reconciliations considered a form of independent verification?

Bank reconciliations serve as a form of independent verification primarily because they provide an internal check of financial transactions. Through the reconciliation process, a bank compares its own records of transactions against the transactions recorded by the business. This process highlights discrepancies, verifies the accuracy of both sets of records, and ensures that all transactions have been properly accounted for.

By examining both the bank's statements and the company's internal records, inconsistencies can be identified, and corrections can be made. This level of scrutiny adds a layer of oversight and helps prevent errors and potential fraudulent activity. It ensures that all financial transactions are accurately reported in the company's financial statements, thereby enhancing the reliability of the financial reporting process.

In contrast, management performing the reconciliations does not inherently provide independent verification, as there may be biases or errors present in their oversight. Easy access to financial records, while beneficial, does not imply independent verification of transactions, and relying on a single employee's review would lack the necessary checks and balances, potentially compromising the verification process.