$2.$ Bank Reconciliation $($Exhibit $2)$: The account receivable collected by the bank was paid by a client directly to the bank on December $29,$ year$5.$ Keystone recorded the entry for the proper amount on January $2,$ year $6.$

No adjusting entry is needed as of $12/31/$year $5.($Callout #$2)$EXHIBIT $2$

$*$Examined bank statement and identified receivable proceeds deposited in account by bank on $12/29$; traced entry to

entry in cash receipts journal on $\frac{1}{2}/$year $6$ when Keystone found out about the deposit made by the bank $($Keystone

entry: debit Cash, credit Accounts Receivable$).$ Staff Associate

Choose an option below to repalce callout #$2.$

a$.[$Original text$]$ No adjusting entry is needed as of $12/31/$year $5.$

b$.[$Delete entire point $2]$

c$.$ We should propose an adjusting entry as of $12/31/$year $5$ debiting cash and crediting accounts receivable for $$6,000.$

d$.$ We should propose an adjusting entry as of $12/31/$year $5$ debiting cash and crediting miscellaneous revenues as net income is understated as of $12/31/$year $5.$

e$.$ We should increase our assessed level of fraud risk due to this situation and propose no adjusting entry as of $12/31/$year $5.$