For each substantive procedure below, identify its primary objective or indicate that the procedure serves no purpose.
Substantive Procedures:
a. Prepare a bank transfer schedule.
b. Prepare a four-column proof of cash.
c. Use a standard confirmation form to confirm account balance information.
d. Obtain bank cutoff statements.
e. Search for large checks to directors, officers, and employees.
Replies: A primary objective of the procedure is to:
1. Detect kiting.
2. Detect lapping.
3. Determine that receivables are converted to cash in a reasonable amount of time.
4. Establish the valuation of cash to reflect currency translation losses and gains.
5. Reconcile cash receipt and disbursement totals between company records and bank records.
6. Verify reconciling items on the year-end bank reconciliation.
7. Verify year-end cash and liability balance information.
8. Identify related party transactions.
9. None. This procedure serves no purpose related to cash.