The following questions deal with discovering fraud in auditing year-end cash. Choose the best response.
a. Which of the following cash transfers results in a misstatement of cash at December
31, 2019?
BANK TRANSFER SCHEDULE
Disbursements Receipt
Transfer Recorded in Books Paid by Bank Recorded in Books Received by Bank
(1) 12/31/19 1/4/20 12/31/19 12/31/19
(2) 1/4/20 1/5/20 12/31/19 1/4/20
(3) 12/31/19 1/5/20 12/31/19 1/4/20
(4) 1/4/20 1/11/20 1/4/20 1/4/20
774Part 4 / APPLICATION OF THE AUDIT PROCESS TO OTHER CYCLES
b. The auditor should control and verify all liquid assets simultaneously to prevent
(1) unrecorded disbursements.
(2) conversion of assets to conceal a shortage.
(3) unauthorized disbursements.
(4) embezzlement.
c. Which of the following is one of the better auditing techniques to detect kiting?
(1) Review composition of authenticated deposit slips
(2) Review subsequent bank statements and cancelled checks received directly from
the banks
(3) Prepare year-end bank reconciliations
(4) Prepare a schedule of bank transfers from the client’s books
