The Check Clearing for the 21st Century Act (Check 21 Act) allows recipients of paper checks to create a digital image of the original check, eliminating the need for further handling of the actual check. The Federal Reserve Board has created a consumer guide, Consumer Guide to Check 21 and Substitute Checks, which can be […]
In the audit of the Regional Transport Company, a large branch that maintains its own bank account, cash is periodically transferred to the central account in Cedar Rapids. On the branch account’s records, bank transfers are recorded as a debit to the home office clearing account and a credit to the branch bank account. Similarly, […]
You are auditing general cash for the Pittsburgh Supply Company for the fiscal year ended July 31, 2019. The client has not prepared the July 31 bank reconciliation. After a brief discussion with the owner, you agree to prepare the reconciliation, with assistance from one of Pittsburgh Supply’s clerks. You obtain the following information: General […]
The following audit procedures are concerned with tests of details of general cash and financial instruments balances: 1. Obtain a standard bank confirmation from each bank with which the client does business. 2. Compare the balance on the bank reconciliation obtained from the client with the bank confirmation. 3. Trace deposits in transit on the […]
The following are misstatements that might be found in the client’s year-end cash balance : 1. A check was omitted from the outstanding check list on the June 30 bank reconcilia- tion. It cleared the bank July 7. 2. Cash receipts collected on accounts receivable from July 1 to July 5 were included as June […]
The following questions concern auditing year-end cash and financial instruments. Choose the best response. a. Which of the following controls would most likely detect a kiting scheme? (1) Preparing a bank reconciliation (2) Using a lockbox system for customer receipts (3) Comparing the details of deposit tickets and recorded remittance advices (4) Preparing a bank […]
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 […]
The following questions deal with auditing year-end cash and financial instruments. Choose the best response. a. A CPA obtains a January 10 cutoff bank statement for a client directly from the bank. Very few of the outstanding checks listed on the client’s December 31 bank reconcili- ation cleared during the cutoff period. A probable cause […]
Explain the relationships among the initial assessed control risk, tests of controls and substantive tests of transactions for cash receipts, and the tests of details of cash balances. 23-2 (OBJECTIVE 23-1) What is meant by an imprest bank account for a branch operation? Explain the purpose of using this type of bank account. 23-3 (OBJECTIVE […]
1. Explain why an auditor compares the “date of deposit according to the books” to the “date of disbursement according to the books” on an interbank transfer schedule to detect kiting. 2. Briefly explain why accounting standards related to fair value estimates make the audit of financial instruments more complex
