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FIGURE 22 -2
FIRGURE 22 -4
FIRGURE 22 - 5
FRAUD-ORIENTED PROCEDURES
Extended Tests of the Bank Reconciliation All recorded cash receipts were deposited. All deposits in the bank were recorded in the accounting records. All recorded cash disbursements were paid by the bank. All amounts that were paid by the bank were recorded.
Proof
of Cash
A reconciliation of the balance on the bank statement with the general ledger balance at the beginning of the proof-of-cash period. A reconciliation of cash receipts deposited per the bank with the cash receipts journal for a given period. A reconciliation of cancelled checks clearing the bank with the cash disbursements journal for a given period. A reconciliation of the balance on the bank statement with the general ledger balance at the end of the proof-of-cash period.
FIGURE 22 - 7
Types of Cash Accounts and their Relationship to the General Cash Account
FIGURE 22 - 8
Petty cash is a unique account because it is often immaterial in amount,yet it is verified on many audits. The account is verified primarily because of the potential for defalcation and the clients expectation of an audit review even when the amount is immaterial.
Transactions in most cycles affect the cash account. Wait to audit the ending cash balance until the controls and substantive tests of transactions have been completed for all cycles. Tests of the cash balance normally include include tests of the bank reconciliations of key cash accounts, such as the general cash accounts, imprest payroll account, and imprest petty cash fund.
Cash receipts recorded in the cash receipts journal but lost before deposit. A check recorded in the cash disbursements journal for an amount $100
greater than the amount that the check was written for.
Which of the Following Misstatements Will Be Uncovered by a Carefully Prepared Independent Bank Reconciliation?
Cash receipt lost before it was recorded in the cash receipts journal. Bank debit memo that should have been charged to a different customer. A check written for $100 more than the amount on the vendors invoice. A stop-payment by a customer where the client was not informed that the
stop-payment had taken place.