Integrated Audit Practice Case

SEVENTH EDITION

Assignment EIGHT

Discussion Questions

1.Auditors send bank confirmations for most active bank accounts. Are bank confirmations

required under AICPA or PCAOB auditing standards? How does this compare to the

requirements for confirmation of accounts receivable?

2.What is the primary purpose of a bank confirmation? Why does the auditor confirm the

bank balance in addition to agreeing the year-end bank balance to the bank statement?

What additional information is included with a standard bank confirmation?

3.Bank confirmations are often sent electronically using a third-party intermediary. The

auditor transmits the request to the intermediary, which then transmits the request to the

bank. What are the advantages of using a third-party to send confirmations electronically?

4.Suppose there were several large outstanding checks on the year-end bank reconciliation

that did not clear the bank by the cutoff date. Discuss the possible cause(s) of this, and

discuss the nature of the potential misstatement(s) that could result.

5.Suppose there was a deposit-in-transit on the year-end bank reconciliation that was not

received by the bank by the cutoff date. Discuss the possible cause(s) of this, and discuss

the nature of the potential misstatement(s) that could result