Multiple Choice Questions
The auditor would send a bank confirmation to all banks with which the client had business during the year, because
a. The confirmation seeks information on indebtedness that may exist even if the bank accounts are closed.
b. Confirmations are essential to detecting kiting schemes.
c. Confirmations provide information about deposits in transit that is useful in proving the client's year-end bank reconciliation.
d. All of the above.
2. An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when
a. The check register for the last month is reviewed
b. The cutoff bank statement is reviewed as part of the year-end bank reconciliation
c. The bank confirmation is reviewed
d. The search for unrecorded liabilities is performed
*Items 13-33 and 13-34 are based on the following:
The following information was taken from the bank transfer schedule prepared during the audit of Fox Co.'s financial statements for the year ended December 31, 2007. Assume all checks are dated and issued on December 30, 2007.

3. Which of the following checks might indicate kiting?
a. 202
b. 303
c. 404
d. 202 and 303
4. Which of the following checks illustrate deposits/transfers in transit at December 31, 2007?
a. 101 and 202
b. 101 and 303
c. 202 and 404
d. 303 and 404
5. An auditor should trace bank transfers for the last part of the audit period and first part of the subsequent period to detect whether:
a. The cash receipts journal was held open for a few days after the year end.
b. The last checks recorded before the year end were actually mailed by the year end.
c. Cash balances were overstated because of kiting.
d. Any unusual payments to or receipts from related partiesoccurred.

BANK ACCOUNTS DISBURSEMENT DATE RECEIPT DATE Per Books Per Bank Per Books Per Bank Check 0 From 101 202 303 404 National County Federal State Federal State State County Dec. 30 Jan. 3 Dec. 31 Jan. 2 Jan. 4 Jan. 2 Jan. 3 Jan. 2 Dec. 30 Dec. 30 Jan. 2 Jan. 2 Jan. 3 Dec. 31 Jan. 2 Dec. 31