You are the auditor. See the bank statement in Exhibit 6.3 on page 235. At first (or second or third or fourth!) glance it looks fine. However, it has definitely been "doctored" by the client, resulting in 3 or 4 errors on it, depending on how they are described and combined. In Questions 1-2 of this assignment, you are asked to describe 2 of them. Once you find one, the rest will probably flow from there. They do not have to be in any particular order. Some of the errors are related, so if you happen to combine them, I will grade them separately. In Question 3 you will answer why you think the bank statement was doctored by the client. What did they hope to achieve? 

These can be found a number of ways so you may not need any additional information. However, if you do, use the information in chapter 6 and perhaps especially pages 243-246 (especially perhaps the Auditing Insight on 244), 251, and perhaps an item or 2 on appendix 6B.2. The chapter says to "think like a fraudster" so ask yourself what a fraudster would hope to gain or hide. Even though you can't perform all the steps in an audit plan, and you don't have the accompanying bank bank reconciliation, you have the information and guidance to perform the steps you need to perform to find the problems.

The section on Control Activities for Cash Receipts on page 238 might help you think globally about the lapses in internal control that allowed it to happen. Or this might not help at all. Don't get hung up there if it doesn't help.

Another idea: If you can't find the steps, maybe looking at what (sort of) similar steps auditors took with the bank reconciliation on page 245 will help give you a clue as to the steps to take. 

One more idea: if you look at it for awhile, and using the helps above and steps in the chapter are still stuck, come back a little later and look again. We know what a bank statement should look like, so it can at times be hard to see what is different. However, this assignment is meant to be done using audit steps, not luck or happenstance.

Describe one error in the bank statement.

 Describe one error in the bank statement ?

 What do you think caused one specific error in particular (tell which one) or all of the errors together? What leads you to your conclusion? 

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Chapter 6 Employee Fraud and the Audit of Cash 235 Bank Statements Most of the information shown on the bank statement in Exhibit 6.3 is self-explanatory. However, auditors should not overlook the usefulness of some of the information: The num- ber and dollar amount of deposits and checks can be compared to the detail data on the bank statement; the account holder's federal business identification number is on the statement, and this can be used in other databases; and the statement itself can be studied for alterations. 27 XFirst RepublicBank FIRST REPUBLICBANK AUSTIN, N.A. P.0. BOX 908 ACCOUNT 604017-526-5 AUSTIN, TEXAS 78781 PAGE 1. CAULCO INC SSN/TAX ID BLDG 1 OFFICE F 74-2076251 5450 BEE CAVE RD AUSTIN, TX CYC MC FREG 78746 01 01 MO000 ** YOUR CHECKING ACCOUNT 01-29-20 THRU 02-29-20 ** TO YOUR PREVIOUS BALANCE OF YOU ADDED YOU SUBTRACTED GIVING YOU A CURRENT BALANCE OF 7,559.06 1 DEPOSITS FOR 5,654.16 10,838.29 7,374.93 26 WITHDRAWALS FOR NUMBER OF DAYS USED FOR AVERAGES 31 YOUR AVERAGE LEDGER BALANCE - 4,014.67 2,374.93 YOUR LOW BALANCE OCCURRED ON 02-22 AND WAS THANK YOU DEPOSITS AND OTHER ADDITIONS DATE AMOUNT 0204 5654.16 CHECKS AND OTHER WITHDRAWALS CHECK DATE AMOUNT CHECK DATE AMOUNT CHECK DATE AMOUNT 2201 0211 57.83 2214 0203 403.92 2225 0217 182.77 2215 0203 135.59 ** ** 2231 0205 254.37 16.72 533.28 2205 0222 2216 0216 6.16 2206 0203 2217 0217 138.43 2232 0210 60.61 2207 0203 1312.15 2218 0217 131.92 2219 0217 82.97 2234 0217 64.69 ** 247.10 2220 0217 87.49 2235 0218 279.97 2209 0203 2210 0203 249.98 2221 0217 85.68 ** 84.69 2238 0219 90.00 2211 0203 255.26 2222 0217 ** 2212 0203 242.09 2213 0203 384.91 2224 0217 449.71 Chapter 6 Employee Fraud and the Audit of Cash 235 Bank Statements Most of the information shown on the bank statement in Exhibit 6.3 is self-explanatory. However, auditors should not overlook the usefulness of some of the information: The num- ber and dollar amount of deposits and checks can be compared to the detail data on the bank statement; the account holder's federal business identification number is on the statement, and this can be used in other databases; and the statement itself can be studied for alterations. 27 XFirst RepublicBank FIRST REPUBLICBANK AUSTIN, N.A. P.0. BOX 908 ACCOUNT 604017-526-5 AUSTIN, TEXAS 78781 PAGE 1. CAULCO INC SSN/TAX ID BLDG 1 OFFICE F 74-2076251 5450 BEE CAVE RD AUSTIN, TX CYC MC FREG 78746 01 01 MO000 ** YOUR CHECKING ACCOUNT 01-29-20 THRU 02-29-20 ** TO YOUR PREVIOUS BALANCE OF YOU ADDED YOU SUBTRACTED GIVING YOU A CURRENT BALANCE OF 7,559.06 1 DEPOSITS FOR 5,654.16 10,838.29 7,374.93 26 WITHDRAWALS FOR NUMBER OF DAYS USED FOR AVERAGES 31 YOUR AVERAGE LEDGER BALANCE - 4,014.67 2,374.93 YOUR LOW BALANCE OCCURRED ON 02-22 AND WAS THANK YOU DEPOSITS AND OTHER ADDITIONS DATE AMOUNT 0204 5654.16 CHECKS AND OTHER WITHDRAWALS CHECK DATE AMOUNT CHECK DATE AMOUNT CHECK DATE AMOUNT 2201 0211 57.83 2214 0203 403.92 2225 0217 182.77 2215 0203 135.59 ** ** 2231 0205 254.37 16.72 533.28 2205 0222 2216 0216 6.16 2206 0203 2217 0217 138.43 2232 0210 60.61 2207 0203 1312.15 2218 0217 131.92 2219 0217 82.97 2234 0217 64.69 ** 247.10 2220 0217 87.49 2235 0218 279.97 2209 0203 2210 0203 249.98 2221 0217 85.68 ** 84.69 2238 0219 90.00 2211 0203 255.26 2222 0217 ** 2212 0203 242.09 2213 0203 384.91 2224 0217 449.71

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Errors or omissions by the bank can result in a difference between the balance as per state... View the full answer