Wellp .. I can already tell A4 is gonna suck ..
I'm not really understanding the difference between A and B. Can someone please help me?
On receiving a client's bank cutoff statement, an auditor most likely would trace:
a. Prior-year checks listed in the cutoff statement to the year-end outstanding checklist.
b. Deposits in transit listed in the cutoff statement to the year-end bank reconciliation.
c. Checks dated after year-end listed in the cutoff statement to the year-end outstanding checklist.
d. Deposits recorded in the cash receipts journal after year-end to the cutoff statement.
Choice “a” is correct. The auditor should obtain bank cutoff statements that include transactions for 10 to 15 days after year-end. The outstanding checks and deposits in transit at year-end on the bank reconciliation should agree with the information in the bank cutoff statement.
Choice “b” is incorrect. Companies may have a tendency to overstate their cash balance. A company that is trying to improve its balance sheet will have a tendency to accelerate recording of deposits, so a deposit that wasn't really made until January might be erroneously listed as a deposit in transit at year-end. Tracing deposits from the cutoff statement to the year-end bank reconciliation won't identify this error, since there is no mention in this option of identifying the actual dates the deposits were made.
- passed all 4 exams on my first try using Becker!
Ethics: TBD
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