Question 1
The process of transferring money from one bank account to another and improperly recording the transaction is referred to as
◦ kiting.
◦ lapping.
◦ scamming.
◦ embezzling.
Question 2
When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to perform extended tests of the year-end bank reconciliation. Assuming the client has an October 31 year-end, these extended tests would
not include
◦ comparing all September 30 reconciling items with canceled checks and other documents in the October bank statement.
◦ comparing all canceled checks and deposit slips in the October bank statement with the October cash disbursements and receipts records.
◦ carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff statement.
◦ determining that all outstanding checks had cleared by the date of the bank cutoff statement.
Example of Reconciling a Bank Statement
Example of Reconciling a Bank Statement Cont.
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