$10-41.$

O $10$

$-3$

$5$

Adapted AICPA Simulation

Items a through $/$ represent possible errors and fraud that you suspect may be present at Rex Company. The accompar

Auditing Procedures represents procedures that the auditor would consider performing to gather evidence concerning i

and fraud. For each item, select one or two procedures, as indicated, that the auditor most likely would perform to gat

in support of that item. The procedures on the list may be selected once, more than once, or not at all.

$06$

LIST OF AUDITING PROCEDURES

A$.$ Compare the details of the cash receipts journal entries with the details of the corresponding daily deposit slips.

B$.$ Scan the debits to the fixed asset accounts and vouch selected amounts to vendors' invoices and management's authori

C$.$ Perform analytical procedures that compare documented authorized pay rates to the entity's budget and forecast.

D$.$ Obtain the cutoff bank statement and compare the cleared checks to the year$-$end bank reconciliation.

E$.$ Prepare a bank transfer schedule.

F$.$ Inspect the entity's deeds to its real estate.

G$.$ Make inquiries of the entity's attorney concerning the details of real estate transactions.

H$.$ Confirm the terms of borrowing arrangements with the lender.

I. Examine selected equipment repair orders and supporting documentation to determine the propriety of the charges.

J$.$ Send requests to confirm the entity's accounts receivable on a surprise basis at an interim date.

K$.$ Send a second request for confirmation of the receivable to the customer and make inquiries of a reputable credit agenc

concerning the customer's creditworthiness.

L$.$ Examine the entity's shipping documents to verify that the merchandise that produced the receivable was actually sent to

customer.

M$.$ Inspect the entity's correspondence files for indications of customer disputes for evidence that certain shipments were o

consignment.

N$.$ Perform edit checks of data on the payroll transaction tapes.

O$.$ Inspect payroll check endorsements for similar handwriting.

P$.$ Observe payroll check distribution on a surprise basis.

Q$.$ Vouch data in the payroll register to documented authorized pay rates in the human resources department's files.

R$.$ Reconcile the payroll checking account and determine if there were unusual time lags between the issuance and payme

checks.

S$.$ Inspect the file of prenumbered vouchers for consecutive numbering and proper approval by an appropriate employee.

T$.$ Determine that the details of selected prenumbered vouchers match the related vendors' invoices.

U$.$ Examine the supporting purchase orders and receiving reports for selected paid vouchers.

Possible Misstatements Due to Errors and Fraud

a$.$ The auditor suspects that a kiting scheme exists because an accounting department employee who can issue and record checks seems

an unusually luxurious lifestyle. $($Select only $1$ procedure.$)$