You Are Auditing Cash for Moonbeam, Inc

Question

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The Answer is There are three tests used for detecting fraud in the cash accounts. The first is extended bank reconciliation procedures. The auditor examines disposition of the reconciling items included on the prior months' reconciliations and the reconciling items included in the current bank reconciliation. These procedures can locate a fraud that used reconciling items to cover a cash defalcation.
A second test is a proof of cash. A proof of cash reconciles the cash receipts and disbursements recorded on the entity's books with the cash deposited into and disbursed from the entity's bank account for a specific time period. Its primary purpose is to ensure that all cash receipts recorded in the entity's cash receipts journal were deposited in the entity's bank account, to ensure that all cash disbursements recorded in the cash disbursements journal have cleared the bank account, and to ensure that no bank transactions have been omitted from the entity's accounting records. It can detect cash stolen after being recorded on the entity's books.
A third test is a test for kiting. Kiting is the process of covering a cash shortage by transferring money from one bank account to another and recording the transactions improperly on the entity's books. A test for kiting is completed through the use of an inter-transfer schedule that lists all the transfers made between cash accounts. Each transfer is followed through from one account to another, noting the dates recorded on the entity's book and the dates on the bank statements.

You Are Auditing Cash for Moonbeam, Inc

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