ExpertMedium1 markMultiple Choice
CPA · Question 76 · Area 3: Performing Procedures
An auditor is auditing the 'Completeness' of the cash balance. Which procedure is most appropriate?
An auditor is auditing the 'Completeness' of the cash balance. Which procedure is most appropriate?
Answer options:
A.
Counting cash on hand.
B.
Reviewing the bank cutoff statement for outstanding checks that cleared after year-end.
C.
Vouching deposits in transit to the bank statement.
D.
Inquiring of the treasurer.
How to approach this question
Completeness = Is everything there? Cutoff statement helps verify the reconciliation items (what was missing from the bank view).
Full Answer
B.Reviewing the bank cutoff statement for outstanding checks that cleared after year-end.✓ Correct
Reviewing the bank cutoff statement for outstanding checks that cleared after year-end.
The bank cutoff statement allows the auditor to verify the propriety of reconciling items (like outstanding checks and deposits in transit) on the year-end bank reconciliation, ensuring the adjusted book balance is complete and accurate.
Common mistakes
Confusing Existence (Bank Confirmation) with the detailed testing of the reconciliation (Cutoff Statement).
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