FINAL EXAMINATION-solutions

AUTUMN SESSION 2010

SCHOOL OF ACCOUNTING
Student Family Name:
Student Given Names:
Student Number:
Tutor’s name

Unit Name (In Full): Auditing and Assurance Services

Unit Number: 200535
Time Allowed: Two (2) hours plus 10 minutes reading time.
Number of Questions: Six (6) questions
Total Number of Pages: 17 (including the cover sheet)
Unit Co-ordinator’s Name: Dr Kym Butcher
Assessor Associate Professor Philip Ross

INSTRUCTIONS
PLEASE READ CAREFULLY BEFORE PROCEEDING

1. Ensure your name and student number is written on the top of this examination paper.
2. Ensure your name and student number is written on top of the multiple-choice answer sheet.
3. This is a CLOSED BOOK examination. The Auditing and Assurance Standards Handbook
2010 is not permitted to be used in this examination.
4. The value of each question is indicated at the start of each question.
5. Non-programmable calculators are permitted.
6. Attempt all questions.
7. Answer Question 1 on the multiple choice answer sheet provided.
8. Answer Questions 2 through 6 inclusive in the spaces provided within this examination paper.
Answers outside the spaces will not be marked.
9. This assessment is worth 60% of the overall assessment mark.

Question Marks available Student’s Mark /100 Student’s Mark/60

1 20 MPC
2 15 Research
3 12 Case Independence
4 20 Case type of audit
report
5 13 Big case duty of care
6 20 Case audit risk
TOTAL 100 No Short Ans
DO NOT TAKE ANY PART OF THIS PAPER FROM THE EXAMINATION ROOM

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Question 1: Multiple Choice Questions 20 marks

(1)During the process of confirming receivables as of 30 June 2010, a positive

confirmation was returned indicating the ‘balance owed as of 30 June was paid on 9
July 2010.’ The auditor would most likely:

A: Determine whether a customary trade discount was taken by the customer.

B: Determine whether there were any changes in the account between 1 July and 9
July 2010.
C: Check subsequent cash receipts to confirm that the amount was received.
D: Reconfirm the zero balance as of 9 July 2010.

Answer: C

(2)An auditor analyses repairs and maintenance accounts primarily to obtain evidence
that:
A: expenditures for property, plant and equipment have been recorded in the proper
period.
B: non-capitalisable expenditures for repairs and maintenance have been recorded in
the proper period.
C: expenditures for property, plant and equipment have not been charged to expenses.
D: non-capitalisable expenditures for repairs and maintenance have been properly
charged to expenses.

Answer: C
(3)Which of the following procedures would be most valuable in the performance
audit of a government transport department?

A: Review procedures for selection of the most appropriate routes.

B: Obtain written confirmation from the regulatory agency that all carriers are
properly licensed.
C: Verify that dispatch dockets are pre-numbered.
D: Trace selected items from the transport payments register to supporting
documentation.

Answer: A

(4)Two months before the year-end the bookkeeper erroneously recorded the receipt
of a long-term bank loan by a debit to cash and a credit to sales. Which of the
following is the most effective procedure for detecting this type of misstatement?

A: Analyse bank confirmation information.

B: Analyse the notes payable journal.
C: Prepare a year-end bank transfer schedule.
D: Prepare a year-end bank reconciliation.

Answer: A

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(5) Which of the following is not one of the auditor’s primary objectives when
external confirming holdings of marketable securities?
A: To determine whether recorded securities are properly classified on the statement
of financial position.
B: To determine whether recorded securities are the property of the client.
C: To determine whether recorded securities actually exist.
D: To determine whether recorded securities are authentic.

Answer: A

(6) Tests of controls:

A: should focus on transactions with high dollar value.
B: allow the auditor to increase the level of acceptable detection risk.
C: allow the auditor to reduce the level of inherent risk.
D: should not be used in areas where inherent risk is evaluated as high.

Answer: B

(7) The auditor is most likely to verify the liability account “accrued commissions
payable” in conjunction with the:
A: Verification of contingent liabilities.
B: Review of sales transactions.
C: Examination of trade accounts payable.
D: Review of disbursements after year-end.

Answer: B

(8)Which of the following internal controls would be most likely to deter the lapping
of collections from customers?
A: Supervisory comparison of the daily cash summary with the sum of the cash
receipts journal entries.
B: Segregation of duties between receiving cash and posting the accounts receivable
ledger.
C: Authorisation of write-offs of uncollectible accounts by a supervisor independent
of the credit approval function.
D: Independent internal verification of dates of entry in the cash receipts journal with
dates of daily cash summaries.

Answer: B

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 (9) Certain circumstances, while not affecting the auditor's unqualified opinion on
the financial report, may require the auditor to add an emphasis of matter paragraph to
the report. These circumstances include all of the following except where:
A: There is significant uncertainty about the entity's ability to continue as a going
concern.
B: The entity is facing significant litigation.
C: There is early application of a new accounting standard that has a pervasive effect
on the financial report before its effective date.
D: There is a matter involving a significant uncertainty that is not adequately
disclosed.

Answer: D

(10)Which of the following example is a compliance audit in relation to Bigger

University?
A: Reporting to University Council on the tendering process for the construction
of its new computer installation.
B: Reporting on its financial report to be presented to Parliament.
C: Reporting to University Council as to whether the various faculties have met
their objectives set out in their mission statements.
D: Reporting to University Council on whether faculties have followed the
University travel guidelines.

Answer: D

(11) Which of the following is not a reason to assess control risk as high?
A: Internal control policies or procedures are unlikely to be effective.
B: Evaluating the effectiveness of the internal control policies or procedures
would be more time consuming than another audit approach.
C: The auditor has assessed detection risk as high.
D: Internal control policies or procedures are unlikely to pertain to an assertion.

Answer: C

(12) Which of the following procedures would be most valuable in the performance
audit of a government transport department?
A: Review procedures for selection of the most appropriate routes.
B: Obtain written confirmation from the regulatory agency that all carriers are
properly licensed.
C: Verify that dispatch dockets are pre-numbered.
D: Trace selected items from the transport payments register to supporting
documentation.

Answer: A

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(13) An entity is facing significant litigation as a result of dumping oil in the ocean.
This is adequately disclosed in the notes to the financial report. The appropriate audit
report is:
A: A qualified opinion.
B: An unqualified opinion with an ‘Other Matter’ paragraph.
C: An adverse opinion.
D: An unqualified opinion with an ‘emphasis of matter’ paragraph.

Answer: D

(14) In which of the following situations would an auditor most likely use a strategy
of reliance on internal control?
A: The auditor hired an IT specialist whose report to the auditor reveals that the
specialist did not perform sufficient procedures to allow the auditor to
properly assess the effect of IT on control risk.
B: The client has been slow to update its IT system to reflect changes in billing
practices.
C: The auditor has been unable to ascertain whether all changes to a client’s IT
were properly authorised.
D: A client receives sales orders, bills customers, and receives payment based
only on information generated from IT—no paper trail is generated.

Answer: D

(15) An auditor most likely would limit substantive audit tests of sales transactions
when control risk is assessed as low for the occurrence assertion concerning sales
transactions and the auditor has already gathered evidence supporting:
A: Opening and closing inventory balances.
B: Cash receipts and accounts receivable.
C: Shipping and receiving activities.
D: Cut-offs for sales and purchases.

Answer: B

(16) An auditor concludes that there is substantial doubt about an entity’s ability to
continue as a going concern for a reasonable period of time. If the entity’s disclosures
concerning this matter are adequate, the audit report may include:

Disclaimer of opinion Qualified opinion

A Yes No
B No Yes
C No No
D Yes Yes

Answer: C
(17) An auditor, Sam Cade, failed to follow generally accepted auditing standards in
auditing Sun Ltd’s financial report. Sun’s management had told Cade that the audited

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report would be submitted to several banks to obtain financing. Relying on the report,
New Bank gave Sun a loan. Sun defaulted on the loan. If New Bank sues Cade, Cade
will most likely:
A: Lose because Cade knew that banks would be relying on the financial report.
B: Win because there was insufficient proximity between Cade and New Bank.
C: Lose because Cade was negligent in performing the audit.
D: Win because New Bank was contributorily negligent in granting the loan.

Answer: B

(18) Which of the following audit tests would be regarded as a test of controls?
A: Sending an external confirmation to a debtor to check the outstanding balance at
the end of the year.
B: Counting inventory and checking that the quantity is accurately recorded in the
stock records.
C: Tests of the additions to property, plant, and equipment by physical inspections.
D: Inspecting monthly bank reconciliations for evidence that they have been reviewed
by the Chief Accountant.

Answer: D

(19)FMC Electronics Ltd engaged the accounting firm of Crosby, Seals & Anderson
to perform its annual audit. The firm performed the audit in a competent, non-
negligent manner and billed FMC for $16 000, the agreed fee. Shortly after delivery
of the audited financial report, Robert Hightower, the assistant controller, disappeared,
taking with him $28 000 of FMC’s funds. It was then discovered that Hightower had
been engaged in a highly sophisticated, novel defalcation scheme during the past year.
He had previously embezzled $35 000 of FMC’s funds. FMC has refused to pay the
auditor’s fee and is seeking to recover the $63 000 that was stolen by Hightower.
Which of the following is correct?
A: The auditor cannot recover the audit fee and is liable for $63 000.
B: The auditor is entitled to collect the audit fee and is not liable for $63 000.
C: FMC is entitled to recover the $28 000 defalcation, and is not liable for the
$16 000 fee.
D: FMC is entitled to rescind the audit contract and thus is not liable for the $16
000 fee, but it cannot recover damages.

Answer: B

(20)Which of the following statements best describes the auditor's responsibility

regarding the detection of fraud?
A: The auditor is responsible for the failure to detect fraud only when such failure
clearly results from non-performance of audit procedures specifically described in the
engagement letter.

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B: The auditor must extend auditing procedures to actively search for evidence of
fraud in all situations.
C: The auditor should design auditing procedures to provide reasonable assurance that
fraud material to the financial report is detected.
D: The auditor is responsible for the failure to detect fraud only when an unqualified
opinion is issued.

Answer: C

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Question 2 (Research question) 15 marks

Background
ABC Learning Centres Ltd went into administration and receivership in November
2008. One of the key concerns about ABC’s balance sheet as at 30 June 2007 has been
the valuation of intangible assets such as childcare licenses and goodwill.

Required
Assume that you have been asked to advise your audit partner about what would
constitutes sufficient and appropriate audit evidence in regard to assessing the value
of intangible assets in ABC’s accounts as at 30 June 2007. Using ISA 500 as the basis
of your advice, prepare a briefing note for the audit partner that outlines the work and
evidence that would be necessary to gather sufficient appropriate audit evidence in
regard to the valuation of the intangible assets for ABC Learning Ltd as at 30 June
2007.

Solution

Introduction 2
Background
IAS500 2
ABC Learning 2
Discussion of Accounting Issues Regarding Valuation of Intangibles
2
(AASB138)
Reference to IAS540
Testing Assumption by Mgt 2
Inspect Impairment calculations 2
External valuation 2
Conclusion 1

15

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Page 9 of 20
Question 3 (12 marks)

Mr Ralph Storm has recently been appointed as an audit partner to a Big N audit firm.
One of his duties is to review the firm’s audit clients to ensure that the independence
requirements of APES110 Code of Ethics for Professional Accountants are being met.
His review revealed that several audit engagements were potentially in breach of the
APES110 independence requirements. The independent cases are listed in the table
below.

Required:
For each concern:
(i) Identify potential threats to independence, and,
(ii) Recommend any safeguards to reduce any threats to independence.

Case Potential Threats to Safeguards to reduce threats

Independence to independence
(1 marks) (2 marks)
(a) The audit engagement partner for Familiarity threat Safeguards include:
one of the firm’s long-standing Rotate after 5 yrs term and not
clients, KAB Ltd, has been Sec 290.154 says that allow the partner/review
responsible for auditing the group’s using the same lead partner etc to participate in the
accounts since 1970. The partner is engagement partner, review for a period of two
on a first name basis with most of the audit review partner, or years
staff at the companies head office and engagement quality Independent internal quality
regularly participates in social control reviewer over a control review
activities of the company. prolonged period may
create a familiarity
threat.
(b) On review of a successful audit Self interest threat Sec 290 says that “when an
tender submitted to obtain the audit of audit firm obtains an assurance
a major childcare centre for a four engagement at a significantly
year tenure period, it was discovered lower fee level than that
that your audit firm mostly likely won charged by the predecessor
the audit tender because the quoted firm, or quoted by other firms,
audit fee was $13,000 lower than the the self interest threat created
predecessor auditor. will not be reduced to an
acceptable level unless:
(a) the firm is able to
demonstrate that appropriate
time and qualified staff are
assigned to the task
(b) All applicable assurance
standards, guidelines and
quality control procedures are
being complied with.

So the audit firm needs to

demonstrate that the quality of
audit work is commensurate
with the audit fee and quality

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 control procedures have been
met.
(c) On completion of the fieldwork of Self interest and Sec 290.213 of APES110 says
an audit of a major superannuation familiarity threats that “when a firm or a member
company, you discover that the of the assurance team accepts
managing director of the client gifts or hospitality, unless the
offered the entire audit team value is clearly insignificant,
corporate box tickets to the World the threats to independence
Cup Soccer Qualifying Manager at cannot be reduced to an
Telstra Stadium. Seven of the audit acceptable level by the
team members accepted the tickets application of any safeguard.
and took their partner to see the Consequently, a firm or a
game. member of the assurance team
should not accept any gifts or
hospitality”.

So, no safeguards – should

have declined tickets.
(d) The CEO of one high profile Self review threat Sec 290.192 says that the
listed audit client resigned six months lending of staff to an audit
ago and has not been replaced. As a client may create a self-review
result, six months of financial threat when the individual is in
statements have not been prepared. To a position to influence the
comply with the terms of a mortgage, preparation of a client’s
the audit clients needs to present accounts or financial
audited interim financial statements statements. The standard says
to the bank, however, the statements it is ok to give assistance in
can’t be prepared unless the financial emergency situations but only
statements for each the last six if the individual/personnel isn’t
months are prepared. One of your making mgt decisions etc and
audit managers authorised a graduate are not involved in the audit
of your audit firm to help the audit
client prepare the financial
statements. The graduate, who is also
on the audit team for the client, has
completed the statements and the
accounts are ready to be audited to
meet the terms of the loan agreement.

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 Question 4 (20 marks)

Consider each of the following independent situations. In each case, assume the client
is a reporting entity and that a general purpose financial report has been prepared and
audited for the financial year ended 31 December 2010.

Required:

For each independent situation, (a) through (d) you need to decide:

(i) the type of audit report to be issued and,

(ii) if the audit report is to be modified, identify the nature of the matter that
gives rise to that type of audit modification.

Independent Situation Type of audit If modified, identify the nature of

report to be
issued
(2 marks)
(a) Mr Peabeau Ltd, a media Unqualified with
company, has incurred operating an emphasis of
losses and negative cash flows matter
for the last four years. A note
disclosure to the financial
statements indicates that the
current ratio for the current year
is 0.85 and a material bank loan
is subject to re-financing
negotiations. During the year Mr
Peabeau Ltd lost one of it’s
major television station licenses.
In additional, Storm Ltd, Mr
Peabeau Ltd’s parent company
injected significant capital into
the company and has provided
the auditors with a comfort letter.
Mr Peabeau Ltd has disclosed
it’s concerns regarding it’s
uncertainty as a going concern in
the financial report and the
directors declaration. The auditor
has concluded that the going
concern basis is appropriate.
the matter giving rise to the type of
audit modification to be issued
(3 marks)
Material uncertainty (going concern)
Ifthis material uncertainty is
adequately disclosed in the financial
report, the auditor’s report shall
include an emphasis of matter
paragraph in the auditor’s report in
accordance with ASA/ISA 706
(ASA/ISA 570.19).
If adequate disclosure is not made in
the financial report, the auditor shall
express a qualified or adverse opinion,
as appropriate, in accordance with
ASA/ISA 705 (ASA/ISA 570.20).
If, in the auditor’s judgement, the
entity will not be able to continue as a
going concern, then the auditor shall
express an adverse opinion (ASA/ISA
570.21).

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(b) A subsidiary of a major oil Qualified opinion
production company is under
investigation for tax fraud as
they have not paid the required
amount of PAYG tax for the last
four financial years. The auditor
obtained a solicitor’s
representation letter from the
subsidiary’s legal counsel which
indicated that the Tax office has
a strong case against the
subsidiary. The fraud case is not
disclosed in either the
subsidiary’s financial report for
the consolidated financial
statements.
(c) A client has lost their appeal
against an unfair dismissal
lawsuit in the Supreme Court
and has to pay damages of $2.5
million plus legal costs of $1.7
million dollars. The client’s net
assets are $1.3 million dollars
and the financial report has been
prepared on the going concern
basis.
(d ) A major State Government
Department lost $160 million
dollars on Investments in CFD’s
during this year’s stock-market
collapse. The department’s net
assets are$500 million dollars.
The financial report presents a
true and fair view of the
Department’s financial position.
Material misstatement, i.e., the issue
is material, and the client has not
disclosed material information
required to be disclosed.
This will give rise to a qualified
opinion in the auditor’s report.
Adverse opinion Material misstatement of extreme
nature.
The lawsuit is likely to result in the
demise of this client given the
damages and legal costs are more
than it’s net assets.
As such the going concern basis is
inappropriate. The financial report
should be prepared on a liquidation
basis.
Hence, an adverse opinion needs to
be issued as the entire financial report
is misstated.
Unqualified The financial report is ok so an
opinion with unqualified opinion should be
emphasis of matter. expressed on the financial report.
However, a State Dept is accountable
to the general public which should be
informed about the Dept’s Investment
losses, hence an emphasis of matter
should be included in the audit
report.
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 Question 5: (13 marks)
Your firm, AMGB Auditors and Chartered Accountants, a middle-tier auditing firm,
has audited the financial statements of ACB Consulting Services Ltd, a leading
engineering company, for the year ended 30 June 2010. This was your first year
auditing this client, although unqualified audit reports had been issued for the
previous five financial years by the predecessor auditor, Jack and Son’s, a reputable
but small audit firm.
Given the prior year unqualified audit reports, AMGB considered ACB to be a low
risk client and sent an inexperienced audit team to conduct the audit. The audit team
were unable to obtain sufficient appropriate audit evidence, from the predecessor
auditor or by other means, of the accuracy of the opening balances of the accounts.
The audit team documented this in the working papers but the review partner failed to
notice it in his review. An unqualified audit opinion was subsequently issued on the
2010 accounts.
In January 2011, ACB defaulted on their mortgage with BankBest, were unable to
refinance and subsequently went into liquidation. An investigation into the collapse of
ACB revealed that in the 2009 financial reports, ACB’s $870 million total asset figure
included $300 million of non-existent overseas debtors and a $462 million research
project that had been abandoned in 2007 when the project was in it’s developmental
stage. In addition the total liability figure was stated at $15 million but a loan of $228
million had not been recorded. It was further revealed that in September 2010, in an
attempt to obtain funds to finance an overseas project, ACB had sold the property
over which it had a mortgage to an overseas investor. Investigators are unable to
locate the overseas investor.
BankBest has initiated legal action against AMGB to recover the amount of the
mortgage claiming that the audit on the 30 June 2010 financial report was negligently
performed resulting in the auditor’s failing to qualify the audit report and hence
alerting it to ACB’s solvency problems.

Required:
(a) Do you believe AMGB owe BankBest a duty of care? Provide reasons for
your decision, citing relevant case law where appropriate.(5 marks)
A duty of care requires:
proximity

(1 mark)

Definition of Proximity (1 mark)

-Proximity means that the auditor has prepared the report for a third party; and/or
induced the third party to rely on it

OR alternately the text also explains proximity as being where:the report was
prepared on the basis that it would be conveyed to a third party;

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the report would be conveyed for a purpose which was likely to be relied upon by that
third party AND

the third party would be likely to act in reliance on that report, thus running the risk
of suffering loss if the statement was negligently prepared)

Key case is Esanda (1/2 mark)

Proximity could also be established via a privity letter (1/2 mark)

In this case:
Duty of care:
-Proximity did not exist, only reasonable foreseeability (1 mark) as the auditors did
not prepare the report for BankBest nor induce them to rely on it and no privity letter
is mentioned

Concl
-Therefore no duty of care owed to BankBest (1 mark)

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(b) Discuss whether BankBest is likely to be successful in a common-law
action for negligence. Provide reasons for your decision. (8 marks)

Solution

To be successful against the auditor, a third party must provide the following four
types of evidence (1 mark)
1. Duty of care owed
2. Breach of duty i.e., negligence
3. Loss suffered; and
4. Causal relationship between breach and loss.

EITHER

Go through each of the four criteria:

(i) No duty of care owed (1 mark)

(ii) Breach of duty of care, if owed, because:

Auditors were negligent (1/2 mark) as:

- did not obtain sufficient appropriate audit evidence to verify the opening
balances (1/2 mark)
- did not adequately supervise junior staff (1/2) and
- did not adequately review working papers (1/2 mark)

(iii) Loss suffered:

A loss was suffered (1/2 mark) because BankBest will not recover the mortgage
repayments as ABC has gone into liquidation. (1/2 mark)

(iv) Causal relationship between breach and loss.

A causal relationship existed (1 mark) as BankBest will not recover the mortgage
repayments because the financial reports of ABC were not properly audited and an
inappropriate audit opinion was expressed on the 2010 accounts. If the auditors had
expressed a qualified audit report BankBest could have repossessed the mortgaged
property and recovered their money (1 mark)

OR

Because no duty of care other parts (steps (ii), (iii) and (iv) irrelevant (6 marks)

Conclusion
BankBest not likely to be successful in claim against auditors under case law (or tort)
(1 mark)

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QUESTION 6 (20 MARKS)

Required:
For each of the four (4) key audit risks described below complete the following:
(i) Identify the component (s)of audit risk affected and explain why it is an audit risk
(ii) Identify the key account balance (s) affected
(iii) Identify the prime audit assertion (s) to be tested
(iv) Identify ONE audit procedure you would use in your audit program to address the reduce the risk of material misstatement.

The situations are independent of each other and are to be treated separately in your answers.
*NB: If ‘scattergun approach’, max half marks for section.
Description of audit risk Component of audit risk Key Account Prime Best audit
affected (1 mark) and Balance (s) Assertion procedure to
explanation as to why it is an Affected (1 mark) reduce risk
audit risk (1 mark) (1 mark) (1 mark)
(a) In the course of your preliminary High control risk – controls such Accounts Valuation and Subsequent receipts
analytical procedures, you identified that your as daily banking, bank rec’s, receivable allocation review
audit client appears to have a significant debt segregation of duties between OR
recovery problem. Further investigations receiving the cheques and Negative debtors
reveal that the company’s debtor balance is so applying them to appropriate confirmations
high because an employee was caught accounts are obviously not
misappropriating cheques received from working. Hence it is likely that NO tests of controls
customers for payments of their accounts. the accounts receivable balance is – audit strategy
Although the employee was subsequently likely to be misstated. would be
dismissed, the audit partner in charge of the predominately
engagement plans to place no reliance on the substantive
controls in the accounts receivable area.

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(b) As part of the audit of a major client’s Lowers Control risk-by ensuring Sales Occurrence Enquire about
debtors system, a junior member of the audit that all sales are made to procedures for
team informs you, the engagement audit authorised customers and checking credit for
partner, that debtor sales are subject to credit prevents bad and doubtful debts new customers.
approval. Credit checks are conducted on all by ensuring customers have the Select a sample of
new customers and credit limit checks are capacity to pay. sales and examine
done on all existing customers. evidenced of this
check being carried
out .
Enquire about
procedures for
checking credit
limits for existing
customers. Select a
sample of sales and
examine evidence
of credit limit check
before each sale.
(c) As part of the business risk assessment for High inherent risk, because of Payroll expense Occurrence Vouching from
a major audit client, the auditor reviews dismissal of payroll manager it is payroll listing to
monthly newsletters of the client and likely that payroll expense (and timesheets
discovered that six weeks prior to year end, associated liability accounts) are
the payroll manager was dismissed because it likely to be overstated due to the
was discovered he had included his wife and discovery of fictitious employees.
daughter on the payroll for the past five
years. The auditor has decided not to rely on High control risk – although the
controls to reduce the risk of material auditor is not relying on controls,
misstatement for the payroll area. it appears that the function of
preparing and approving the
payroll are not adequately

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 segregated.
(d) You are the audit engagement partner for High control risk- possibility of Cash balance Occurrence/Cut- Prepare a bank
a high risk insurance company. The company kiting, i.e., transferring funds o/s or off` transfers schedule
has known going concern issues. As part of between bank accounts to specifically for several days
developing your audit plan you are reviewing overinflate the cash balance so as cash prior.
your audit clients accounts payable system. to cover a cash shortage or disbursements Obtain a
You find that the duties of issuing cheques, improve the entities cash positon. subsequent bank
recording cheques and reconciling the bank Cash is transferred from one statement and trace
statements are all done by the accounts bank account to another and the all bank tranfers
payable manager, who has been with the cash receipt (cash deposit) is around balance
company for 30 yrs. recorded in the period under date.
audit, but the disbursement
(withdrawal) is not recorded until
the following period. During this
period the money transferred
appears to be in both bank
balances.

End of examination paper

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