The manager of ABC SAOG is presently out of country for business purpose. The company has produced photocopies of fixed deposits receipts. The original fixed deposit receipts were kept in the locked iron safe of the manager. As an auditor what step can be taken? a-Withdraw from the audit if legally permissible b-Mention the case in the auditors opinion c-Obtain external confirmation from bank manager d-Modify the audit report

The manager of ABC SAOG is presently out of country for business purpose. The company has produced photocopies of fixed deposits receipts. The original fixed deposit receipts were kept in the locked iron safe of the manager. As an auditor what step can be taken? a-Withdraw from the audit if legally permissible b-Mention the case in the auditors opinion c-Obtain external confirmation from bank manager d-Modify the audit report

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter7A: Internal Controls

Section: Chapter Questions

Problem 4SPA

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MULTIPLE CHOICE: 4. An auditor who is engaged to examine the financial statements of a business entity will request cutoff bank statement primarily in order to: A. Detect lapping B. Detect kiting C. Verify reconciling items on the client’s bank reconciliation D. Verify the cash balance reported on the bank confirmation inquiry form 5. Which of the following auditing procedures would the auditor not apply to a cutoff bank statement? A. Trace year end outstanding checks and deposits in transit to the cutoff bank statement B. Reconcile the bank account as of the end of the cutoff period C. Compare dates, payees and endorsements on returned checks with the cash disbursements record D. Determine that the year-end deposit in transit was credited by the bank on the first working day of the following accounting period.
A1) Which of the following would the auditor most likely perform when auditing the bank reconciliation for a December 31 year-end audit? a. Confirm the audit client’s book balance shown on the bank reconciliation directly with the bank. b. Verify the audit client’s book balance shown on the bank reconciliation to the Cash balance in the audit client’s trial balance and general ledger. c. Subtract the outstanding check amounts from the audit client’s book balance. d. Verify the deposits in transit amounts to the audit client’s December bank statement.
4. The starting point for the verification of the balance in the general bank account is to obtain: A. The client’s year-end bank statement B. The client’s cash account from the general ledger C. A bank reconciliation from the client D. A cutoff bank statement directly form the bank 5. Which of the following substantive audit procedures is most likely to be performed by the auditor to gather evidence in support of the balance per bank ? A. Compare to general ledger B. Trace to cash receipts journal C. Confirm directly to bank D. Trace items on the cut-off bank statement to bank reconciliation
The manager of ABC SAOG is presently out of country for business purpose. The company has produced photocopies of fixed deposits receipts. The original fixed deposit receipts were kept in the locked iron safe of the manager. As an auditor what step can be taken? Mention the case in the auditors opinion Withdraw from the audit if legally permissible Modify the audit report Obtain external confirmation from bank manager
You are testing the controls over bank accounts for your audit client, Orleans Ltd. You note that the responsibility for bank reconciliations has changed due to a corporate reorganisation halfway through the current financial year. Both the staff member performing the bank reconciliations and the supervisor have changed. You are able to talk to only the current staff member and supervisor because the other staff took voluntary redundancies and left the client’s employment six months ago. Required: (a) What techniques are available to you to gather evidence about the bank reconciliations? Explain how you would use each technique and comment on the quality of the evidence obtained from each . (b) When you ask the employees responsible for bank reconciliations about how they perform the reconciliations there is a possibility that they will not tell the whole truth about their performance of the reconciliations. Given this, will you bother to ask them? Explain (c) Explain the impact of…
In the audit of a client with a fiscal year ending December 31, the CPAs obtain a January 10 bank statement directly from the bank. Explain how this cutoff bank statement will be used a. In the review of the December 31 bank reconciliation.b. To obtain other audit information.
MULTIPLE CHOICE: 1. An auditor ordinarily sends a standard confirmation request to all banks with which the client has done business during the year under audit, regardless of the year-end balance. A purpose of this procedure to A. request a cutoff bank statements and related checks be sent to the auditor B. Detect kiting activities that may otherwise not be discovered C. Seek information about contingent liabilities and security agreements D. Provide the data necessary to prepare proof of cash 2. As one of the year-end audit procedures , the auditor instructed the client’s personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year. After the client’s treasurer had signed the request , it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? A. The request was mailed by the assistant treasurer B. The CPA did not sign the confirmation request before it was mailed C. Sending the request was…
List of Auditing Procedures A. Trace to cash receipts journal. B. Trace to cash disbursements journal. C. Compare to 9/30/X5 general ledger. D. Confirm directly with bank. E. Inspect bank credit memo. F. Inspect bank debit memo. G. Ascertain reason for unusual delay. H. Inspect supporting documents for reconciling item not appearing on cutoff statement. I. Trace items on the bank reconciliation to cutoff statement. J. Trace items on the cutoff statement to bank reconciliation. GENERAL COMPANY Bank Reconciliation 1st National Bank of US Bank Account a. Select 2 procedures b. Select 5 procedures September 30, 20X5 Balance per bank Deposits in transit 9/29/X5 9/30/X5 S 30,300 $ 925 1,175 2,100 32,400 c. Select 5 procedures Outstanding checks #988 8/31/X5 900 #1281 9/26/X5 600 #1285 9/27/X5 350 #1289 9/29/X5 900 #1292 9/30/X5 325 (3,075) 29,325 d. Select 1 procedure e. Select 2 procedures f. Select 1 procedure Customer note collected by bank Error: Check #1282; written on 9/26/X5 for $350…
When an auditor sends out bank confirmations at the year-end audit, they are performing a(n) O analytical procedure. O test of the details of balances. O key item test. O test of the details of transactions.
APPLIED AUDITING Analyze and compute the appropriate answers for the following : (Provide the pertinent solutions to determine your correct answers. You have gathered the following data in the preparation of bank reconciliation on December 31, of the current year for AM Company: a. Balance per Bank Statement P 2,000,000 b. Balance per Book P 1,350,000 c. Bank service charge P 5,000 d. Outstanding checks P 300,000 e. Deposit in Transit P 237,500 f. Proceeds of bank loan, December 1, discounted 6 months at 12%, not recorded in AM Company’s books P 470,000 g. Customer’s NSF check charged back by bank P 25,000 h. Check of Rich Company charged by the bank against AM Company account P 75,000 i.…
The auditor has gathered the following information to test the accuracy of the one prepared by the controller. In particular, the auditor is testing the accuracy of the outstanding cheques. Use the following information to prepare the bank reconciliation and calculate what the total of the outstanding cheques should be. 1. Cash balance - March 31 $39,500 2. Outstanding Deposits $13,810 3. NSF cheque from a customer $750 4. Bank Statement Balance - March 31 $127,100 5. The bank recorded a deposit as $10,000 when the deposit was actually $1,000 6. The bank credited the company's bank account with $3,900 of interest earned 7. The bank statement showed an EFT from a customer for $16,300 8. The bank charged a service charge of $45 9. The company posted cheque #1730 as $890 when the actual amount was properly debited by the bank for $980 a) Outstanding Cheques= $73,095 b) Outstanding Cheques= $76,995 c) Outstanding Cheques=$82,095 d) Outstanding Cheques= $56,795
29 From the following alternatives, choose the internal sources of audit evidence. a. Confirmation from Banker regarding the bank balance as per Bank Book b. Information from the storekeeper regarding closing inventory c. Confirmation from Debtors regarding the amount receivables from them. d. Confirmation from Creditors regarding the amount payable to them.