Which procedure is an auditor most likely to use to detect a check written at ye

Question

Which procedure is an auditor most likely to use to detect a check written at year-end that was intentionally not recorded in the December cash disbursements journal?

a. Prepare a bank transfer schedule using the client’s cash receipts and cash disbursements journal.

b. Review the cutoff statement bank statement received directly from the client’s bank

c. Review the client’s year-end bank reconciliation

d. Confirm the year-end balance using the standard forms to confirm account balance information with financial institutions

e. Verify this with the cash disbursements journal

Explanation / Answer

Answer is:

b. Review the cutoff statement bank statement received directly from the client’s bank

The year-end outstanding checks can be verified by testing a sample of checks returned with the cutoff bank statement rather than tracing all paid outstanding checks.

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