The Cashier of Brooke Company Covered a Shortage in the Cash

question 39

Multiple Choice

The cashier of Brooke Company covered a shortage in the cash working fund with cash obtained on December 31 from a local bank by cashing, but not recording, a check drawn on the company's out-of-town bank. How would the auditor discover this manipulation?

• A)Confirming all December 31 bank balances.
• B)Counting the cash working fund at the close of business on December 31.
• C)Preparing independent bank reconciliations as of December 31.
• D)Preparing and detail testing a bank transfer schedule.

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Definitions:

Salvage Value

The assessed worth of an asset at the expiration of its life of usefulness.

Depreciation Expense

The organized spreading of a tangible asset's expense over the duration of its utility.

Useful Life

The estimated duration a fixed asset is expected to be economically usable, with normal repairs and maintenance.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation to each year of the asset's useful life.