Cash Flashcards
Kiting
overstatement at year end due to failing to record disbursements during the transfer between accounts (when looking at accounts you have to look at when the bank received it and when the disbursement was actually made)
The Usefulness of Bank Confirmation Request
-the bank confirmation request must be done by an individual who is knowledgeable about the financial relationships and transactions that the client has with the bank; if this does now occur then the usefulness is limited
When auditing the statement of cash flow and auditor will most likely do what?
Reconcile items in the statement of cash flow with amounts in other financial statement amounts (accounts such as end/beg cash balance, net income, and depreciation)
the interview of the controller is?
“inquiry”
Bank reconciliation audit procedure
“inspection and records”
Cut-off bank statement
A cut-off bank statement is a regular bank statement that is prepared by the bank by a shorter period than normal and sent directly to the auditors as a method to verify the components of the bank reconciliation.
The way the auditors would verify the bank reconciliation is by tracing the prior year checks in cut-off to the outstanding check in bank reconciliation as a means of verifying completeness and accuracy of the outstanding check-list.
Check kiting
Cash is fraudulently transferred between banks
- insufficient funds are written to create cash
- low average balance
What does a bank confirmation have?
Cash in bank and collateral for loans
In planning the sample, what should the auditor consider in terms of cash receipts?
preliminary judgments about materiality
levels
“Proof of Cash”
usually conducted when fraud and misappropriation is suspected
compares bank balance+deposits-checks vs. beg balance+receipts-disbursement
