During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at year-end had not cleared the bank. Which of the following is a likely explanation?

During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at year-end had not cleared the bank. Which of the following is a likely explanation?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 31CYBK

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Concept explainers

Bank Reconciliation Statement

As a commerce student, we all know that every business has to maintain a cash book to maintain all his cash and bank transactions. A cash book is a book which has two columns, one cash column and one bank column.

Question

Please Correct answer with Explanation And do not Give solution in image format

During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at
year-end had not cleared the bank. Which of the following is a likely explanation?
The year-end cash disbursements records had been closed prior to year-end.
a.
b.
C.
d.
The year-end cash disbursements records had been held open past year-end.
A high probability of kiting.
A high probability of lapping.

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The bank reconciliation revealed that one deposit had cleared the bank two weeks after the date of the deposit. Should this be of concern? Why, or why not?
On receiving the bank cutoff statement, the auditor should trace: a. Deposits in transit on the year-end bank reconciliation to deposits in the cash receipts journal. b. Checks dated prior to year end to the outstanding checks listed on the year-end bank reconciliation. c. Deposits listed on the cutoff statement to deposits in the cash receipts journal. d. Checks dated subsequent to year end to the outstanding checks listed on the year-end bank reconciliation.
Which procedure is an auditor most likely to use to detect a check outstanding at year-end that was not recorded as outstanding on the year-end bank reconciliation? Multiple Choice Prepare a bank transfer schedule using the client's cash receipts and cash disbursements journal. Receive a cutoff bank statement directly from the client's bank. Prepare a four column bank reconciliation using the year-end bank statement. Confirm the year-end balance using the standard form to confirm account balance information with financial institutions. MacBook Ain
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.
By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally be able to detect: a. An unrecorded deposit made at the bank at the end of the month. b. A second payment of an account payable which had already been paid in full two months earlier. c. An embezzlement of cash receipts not recorded in the cash receipts journal before they had been deposited into the bank. d. A receivable collected that had previously been written off as uncollectible.
Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? A. Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices. B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable balance. C. Scan the cash disbursement entries recorded just before year end for indications of unusual transactions. D. Vouch a sample of accounts payable entries recorded just before year end to the unmatched receiving report file.
Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.
when auditing a client's year end cash balance, an auditor uses standard bank confirmations and performs tests on the clients year end bank reconciliations. These substantive procedures test which of the following assertions? a. understandability of presentation and classification b. cutoff c. completeness and valuation and allowance d. rights and obligations, and occurence
The bank reconciliation for ABC Inc. at its year-end, December 31, 2022 includes the following: Outstanding checks $761,342.55. Identify all the following procedures that are applicable to the audit of outstanding checks. Check All That Apply Inspect bank credit memos Trace items on the bank reconciliation to the cutoff bank statement. Trace items to cash receipts journal Ascertain reason for unusual delay, if any. Trace items to cash disbursements journal. Inspect bank debit memos.
Auditors typically will find the items lettered A–F in a client-prepared bank reconciliation. Check the below image for client-prepared bank reconciliation - Required:Assume these facts: On October 11, the auditor received a cutoff bank statement dated October 7. The September 30 deposit in transit; the outstanding checks 1281, 1285, 1289, and 1292; and the correction of the bank error regarding check 1282 appeared on the cutoff bank statement.a. For each of the preceding lettered items A–F, select one or more of the following procedures 1–10 that you believe the auditor should perform to obtain evidence about the item. These procedures may be selected once, more than once, or not at all. Be prepared to explain the reasons for your choices.1. Trace to cash receipts journal.2. Trace to cash disbursements journal. 3. Compare to the September 30 general ledger.4. Confirm directly with the bank.5. Inspect bank credit memo.6. Inspect bank debit memo.7. Ascertain reason for unusual delay, if…
In comparing the processed checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $970 but was erroneously entered in the accounting records as $790. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation? a) $970 increase to Cash and a $790 decrease to Utility Expense. b) $180 increase to Cash and a $180 increase to Utility Expense. c) $180 decrease to Cash and a $180 increase to Utility Expense. d) $180 decrease to Cash and a $180 decrease to Utility Expense. e) $180 increase to Cash and a $120 decrease to Utility Expense.
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.