HM 14

10-40: Items 1 through 6 represent the items that an auditor ordinarily would find on a client-
prepared bank reconciliation. The accompanying List of Auditing Procedures represents
substantive auditing procedures. For each item, select one or more procedures, as indicated,
that the auditor most likely would perform to gather evidence in support of that item. The
procedures on the list may be selected once, more than once, or not at all.
1. Procedure D: Confirming directly with the bank.
Procedure I: Trace items on the bank reconciliation to cut-off statement
2. Procedure A: One of the deposits in transit does not seem the cut-off statement
(the 9/29/05 deposit for $4,500). Therefore, that deposit should be found in the cash
receipt journal.
Procedure G: The cause for the delay needs to be investigated.
Procedure H: Supporting document needs to be inspected.
Procedure I and J: Both deposits would be found to and from the cut-off
statement and bank reconciliation.
3. Procedure B: One of the mentioned checks does not appear in the cut-off
statement (check #988 dated 8/31/05 for $2,200). Accordingly, that check should be
traced to the cash disbursements journal.
Procedure G: A reason for delay should be investigated.
Procedure H: Supporting documents should be inspected.
Procedure I and J: All checks need to be found to and from the cut-off statement
and bank reconciliation.
4. Procedure E: The bank’s credit memo for the note gathered needs to be
examined.
5. Procedure E and I: The bank credit for the check charged by the bank for an
incorrect amount needs to be examined on both the cut-off statement and the bank credit
memo.
6. Procedure C: The single source of the balance as per books is the journal of
cash ledger account as of 9/30/05.

10-41, Auditors perform a number of procedures relating to cash—some unique, some not
unique. For each substantive procedure below, identify its primary objective or indicate that the
procedure serves no purpose.
a. A primary objective of preparing a bank transfer schedule is to detect kiting.
b. A primary objective of four column proof of cash is to reconcile disbursement and
cash receipt totals between bank records and company records
c. Primary use of standard confirmation form to verify year end cash and liability
balance information
d. Primary objectives for bank cut-off statements are to verify reconciling items on
the year-end bank reconciliation.
e. The primary objective of search for large checks to directors, officers, and
employee is to identify related party transactions.
10-45
You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Auto Parts, Inc. Your
newly hired staff assistant reports to you that she is unable to complete the four-column proof of
cash for the month of April 20X0, which you instructed her to do as part of the consideration of
internal control over cash.

R Auto Parts Inc.

Corrected proof of cash for April 20X0

Particulars Balance 3/31/X0 Deposits Checks and Balance 4/30/X0

debits

Per Bank Statement 71,682.84 61,488.19 68,119.40 65,051.63

Deposit in transit:

At 3/31/X0 2,118.18 (2,118.18)

At 4/30/X0 4,918.16 4,918.16

Outstanding Checks:

At 3/31/X0 (14,888.16) 14,888.16

At 4/30/X0 (22,914.70) 22,914.470

Bank Service Charges:

March, 20X0 (22.18) 22.18

April, 20X0 (19.14) 19.14

Note receivable
collected

By bank 4/30/20X0 18,180.00 18,180.00

NSF check of customer

L.G Waite charged by (418.19) 418.19

the bank 3/31/X0, re
deposited and cleared
4/3/X0 per books

Balances as 58,472.49 85,004.54 60,095.90 108,965.45

computed

Balances as per bank 59,353.23 45,689.98 76,148.98 28,894.23

(Note)

Uncollected (880.74) 39,314.56 (16,053.08) 80,071.22

Difference