Questions 4, 5, 6, 7, & 8
1. Obtain cutoff bank statements – Cutoff and Completeness (AU-C 315.A114 a ii & IV) 2. Obtain copies of client’s bank reconciliations. a. Test the mathematical accuracy of every bank reconciliation – Accuracy (AU-C 315.A114 a-iii) b. Trace the line item “Balance per Bank Statement” – Accuracy and Existence (AU-C 315.A114 a-iii, b-i) c. Trace the check number and amount of outstanding items – Occurrence, Completeness, & Accuracy (AU-C 315.A114 a.i-iii) d. Trace the date, check number, and amount of outstanding item – Occurrence & Completeness. (AU-C 315.A114 a.i-ii) e. Trace the amount of any deposits in transit – Cutoff, Classification, & Completeness. (AU-C 315.A114 a.ii, IV, & v) f. Trace line item “Undeposited Cash Receipts” – Classification & Accuracy (AU-C 315.A114 a.iii & v) 3. In presence of client personnel count cash on hand – Accuracy & Existence (AU-C 315.A114 a.iii & b.i) 4. Inquire with management about cash restrictions - Completeness and Classification & Understandability (AU-C 315.A114 c ii & iii)
Description of error or concern:
The main purpose of line item number two is to test for existence. This bank reconciliation also allows Wally’s Billboard and Sign Supply to incur interest expense, as evident by the “Interest Rate” heading. It will also serve Wally’s Billboard and Sign Supply well to have a letterhead account balance confirmation from Woodland National Bank for when the auditors go through bank reconciliation.
The accounts affected in the line item number two are cash, interest payable, Interest expense, accounts payable (credit line), and whatever asset Wally’s Billboard and Sign Supply has for the collateral. Cash and accounts payable are relevant to line item two because we have...