A client recently contacted me to tell me that their bank had cashed a cheque that was over 2 years old. On questioning this they were told that the bank no longer applies the 6 month cut off on cheques.
We checked the legislation that states that cheques are actually valid for 6 years, although banking practice has been to refuse them after 6 months.
We have always written off old cheques for clients when doing their accounts, but it would now seem that we should be keeping them in the accounts for 6 years.
This could have implications for our audits particularly, as theoretically could we be overstating bank balances and should look back over 6 years to identify any written off amounts?
Also, at what point should we reallocate these amounts to creditors rather then outstanding cheques?
Any help or advice would be appreciated.