You have spent two years working as an auditor. In that time, you have come across a

Question:

You have spent two years working as an auditor. In that time, you have come across a number of errors in performing bank reconciliations. Outlined below are some of them:

1. An unreconciled item of $340 was on the client’s final bank reconciliation and was deemed by the client to be immaterial.

2. Two deposits totalling $4,070 relating to accounts receivable were collected on July 2 (the company has a June 30 year end) but recorded as cash receipts on June 30.

3. An amount from an associated company of $40,000 was deposited two days before the end of the year in the client’s bank account and then paid back one week after the end of the year.

4. A cheque for $6,000 was omitted from the outstanding cheque list on the bank reconciliation at December 31. It cleared the bank on January 14.

5. A bank transfer of $20,000 was included as a deposit in transit at December 31 in the accounting records.

Required

a. What control could be implemented to reduce the likelihood of each of the above?

b. What is an audit procedure to detect each of the above?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

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