On the Last Day of the Fiscal Year, the Cash

question 67

Multiple Choice

On the last day of the fiscal year, the cash disbursements clerk drew a company check on bank A and deposited the check in the company account in bank B to cover a previous theft of cash. The disbursement has not been recorded. The auditor will best detect this form of kiting by

• A) examining the composition of deposits in both bank A and bank B subsequent to year-end.
• B) examining paid checks returned with the bank statement of the next account period after year-end.
• C) preparing, from the cash disbursements records, a summary of bank transfers for one week prior to and subsequent to year-end.
• D) comparing the detail of cash receipts as shown by the client's cash receipts records with the detail on the confirmed duplicate deposit tickets for three days prior to and subsequent to year-end.

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Definitions:

Net Borrower

An entity or individual that borrows more money than it lends, resulting in a net debt position.

Net Saver

An individual or entity that saves more money than they spend or invest, contributing positively to their financial assets over time.

Utility-Maximizing

Represents the economic principle where individuals or firms make choices that result in the highest possible level of satisfaction or efficiency within their constraints.

Lender

An individual, institution, or entity that provides funds to another with the expectation that the funds will be repaid, often with interest.