Problem 11-2, Page 472

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Problem 11-2, Page 472
Cash Substantive Audit Procedures on Bank
Reconciliation The following auditee-prepared
bank reconciliation is being examined by you
during an audit of the financial statements of
Cynthia Company
CYNTHIA COMPANY BANK RECONCILIATION VILLAGE BANK ACCOUNT 2 DECEMBER 31, 20X0 CYNTHIA COMPANY BANK RECONCILIATION VILLAGE BANK ACCOUNT 2 DECEMBER 31, 20X0 CYNTHIA COMPANY BANK RECONCILIATION VILLAGE BANK ACCOUNT 2 DECEMBER 31, 20X0 CYNTHIA COMPANY BANK RECONCILIATION VILLAGE BANK ACCOUNT 2 DECEMBER 31, 20X0 CYNTHIA COMPANY BANK RECONCILIATION VILLAGE BANK ACCOUNT 2 DECEMBER 31, 20X0
Balancer per bank (a) 18,375.91
Deposits in transit (b)
12/30 1,471.10
12/31 2,840.69 4,311.79
Subtotal 22,687.70
Outstanding cheques (c)
837 6,000.00
1941 671.80
1966 320.00
1984 1,855.42
1985 3,621.22
1987 2,576.89
1991 4,420.88 (19,466.21)
Subtotal 3,221.49
NSF cheque Returned
12/29 (d) 200.00
Bank charges 5.50
Error cheque no. 1932 148.10
Customer note collected by the bank
(2,750mplus 275 interest (e) (3,025.00)
Balance per books (f) 550.09
Required Indicate one or more audit procedures
that should be performed in gathering evidence in
support of each of the items (a) through (f)
above. (AICAP Adapted)
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• Basic audit procedures that should be performed
  in gathering evidence in support of each of the
  items (a) through (f) of the CYNTHIA COMPANY bank
  reconciliation are as follows
•  
• Balance per bank
• Confirmation by direct written communication with
  bank (see Standard Bank Confirmation).
• Obtain and inspect a January cutoff bank
  statement obtained directly from the bank
  (examine opening balance).
•  
• Deposit in transit
• Verify that the deposit was listed in the January
  cutoff bank statement on a timely basis.
• Trace to the cash receipts journal.
• Inspect the auditee's copy of the deposit slip
  for the date of the deposit.
•  
• Outstanding cheques
• Examine cheques accompanying the January cutoff
  bank statement and trace all 20x0, or prior,
  cheques to the outstanding cheque list.
• Trace outstanding cheques to the cash
  disbursements journal.
• Examine all supporting documents for those
  outstanding cheques that were not returned with
  the cutoff bank statement.
• Ascertain why cheque number 837 has been
  outstanding for so long.
•  
• NSF cheque return
• Follow up on the ultimate disposition of the NSF
  cheques.

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Problem 11-4, Page 473

• Alternative Accounts Receivable Procedures.
• Several accounts receivable confirmations have
  been returned with the notation verification of
  vendor statements is no longer possible because
  our data processing system does not accumulate
  each vendors invoices.
• Required
• What alternative auditing procedures could be
  used to audit these accounts receivable? (AICPA
  Adapted)

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• The auditor can consider alternative confirmation
  methods to test the accounts receivable balance,
  such as confirming individual invoices in the
  balance.
•  
• Auditing procedures other than confirmation which
  may be used to verify an account receivable
  include
•  
• Examination of evidence of subsequent payment of
  the account including
• The customer's remittance advice accompanied by
  the payment.
• The cheque sent in by the customer.
• An authenticated bank deposit ticket listing a
  deposited cheque for the outstanding account.
• An entry in the cash receipts book.
• A credit posted to the customer's account.
•  
• Examination of other evidence including
• Shipping department's notice of shipment,
  accompanied possibly by a receipted copy of the
  bill of lading, the customer's purchase order,
  sales invoices, and any correspondence referring
  to the shipment of the goods.
• Entries removing the goods from inventory.
• Time records and work orders, if appropriate.
•  
• External inquiries as to the existence and credit
  rating of the debtor.
•  
• Discussion of the account with the auditee's
  credit manager, examination of credit department
  records, and records of merchandise returned, and
  such other investigation as may lead to better
  understanding of the nature of the account and
  its collectability.