This simulation presents the Keystone Computers & Networks, Incorporated (Keystone) Cash Work Memo for the general account and petty cash prepared by two members of your audit teamyour responsibility is to evaluate various statements included in that document, considering the various exhibits. Background financial and other information on Keystone is included in Appendix 6C of Chapter 6.

The controller of Keystone Computers & Networks Incorporated (Keystone), a non issuer, prepared six exhibits relating to Keystones General Account cash position at year 5 year-end. A new audit assistant with your CPA firm has begun the audit of cash but has a number of questions and comments based on a quick examination of the exhibits, now included in the working papers, and a discussion of some matters with the controller of Keystone.

Required: Your job as senior on the engagement is to review the various points made by the assistant, including consideration of the exhibits. For each of the sentences called out in the points on the document, determine if the current language is appropriate as is, should be removed altogether, or replaced with any of the provided alternatives. Links to each of the exhibits are provided in the document, but are available in the list below for convenience.

Exhibit 6:

Keystone Computers & Networks Incorporated
Bank Transfer ScheduleGeneral Account
12/31/year 5
		Disbursing Bank (General Account)		Receiving Bank (Special Account)
Check Number	Amount	Books	Bank	Books	Bank
2032	$ 1,500	12/31/year 5	1/1/year 6	12/31/year 5	12/31/year 5
2034	$ 1,650	1/1/year 6	1/1/year 6	1/1/year 5	12/31/year 5
2041	$ 1,200	1/3/year 6	1/3/year 6	1/3/year 6	1/3/year 6

Procedures followed:

Agreed all disbursements to cash disbursements journal and bank statement (date, check no., amount, payee). No exceptions noted.

Agreed all cash receipts to cash receipts journal and bank statement (date, check no., amount, payee). No exceptions noted.

To:	Audit Senior
From:	Audit Assistant
Re:	Keystone Computers & Networks Incorporated General Account Cash Work
Date:	January 11, year 6

I have a number of points related to the auditing procedures I applied to Keystones cash accounts as follows:

8. Bank Transfer Schedule (Exhibit 6): Check 2032 appears to result in the cash being recorded in both accounts per books as of year-end and thus overstates total cash by $1,500 at year-end. (Callout #8)

Question:

8. "Check 2032 appears to result in the cash being recorded in both accounts per books as of year-end and thus overstates total cash by $1,500 at year-end."

Answer options:

Retain the original text.

Delete entire point 8.

Replace with The transaction related to Check 2032 is either a deposit or a withdrawal; it cant be both.

Replace with Check 2032 appears to result in the cash being recorded in both accounts per books as of year-end and thus overstates total cash by $3,000 at year-end.

Replace with Check 2032 is recorded in the general account per bank in year 6; thus it understates total cash by $1,500 at year-end.