Which of the following fraud schemes might be detected through the use of a bank

Question

Which of the following fraud schemes might be detected through the use of a bank cutoff statement? OChecks received by the cashier were not deposited and accounts receivable was not appropriately reduced OChecks were written to nonexistent payees and mailed to the home addresses of officers O Checks were written near year-end to reduce the balance in accounts payable, but were not mailed until a week after year-end O Checks were written in amounts in excess of invoice amounts in a collusion scheme in which the accounts payable clerk was misappropriating refunds of excess payments

Explanation / Answer

1) The following fraud schemes might be detected through the use of a bank cutoff statement:

- Checks were written near year-end to reduce the balance in accounts payable, but were not mailed until a week after year-end.

This fraud can be easily tracked as the bank cutoff statement will verify what are the checks cleared and what are not at all presented for clearence and on investigating the cause can find that these checks were written only with intent to reduce accounts payable balance.

2) The following is a procedure designed to achieve that objective:

- Analytical procedures

Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures.

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