A3 Cash Cycle

Question 1

Deposit in Transit

Answer 1

These are disbursements recorded in one accounting period with receipt occurring in the subsequent period.

Question 2

Remittance Advice

Answer 2

A document sent by a customer to a supplier to inform that an invoice has been paid

Question 3

Lapping

Answer 3

A fraudulent technique where an employee alter the financial records to hide cash paid by a customer. To do this, they pocket the cash of Customer A then apply that payment to Customer B. Creating a lag or cycle of never ending stealing.

Can be detected if the auditor compares $ amounts & dates on deposit slips with AR credits

Question 4

Kiting

Answer 4

Form of fraud that occurs when a check drawn on one bank account is deposited in another bank but no record is made of the disbursement in the balance of the first bank. Auditors should trace bank transfers for the last part of the audit period & first part of subsequent period to detect whether cash balances were overstated because of kiting.

Question 5

Year End Cash Balance

Answer 5

Primary evidence regarding year end cash balances in the FS is documented in the bank reconciliation, which reconciles the balance per the bank to that per the FS.