The following questions deal with discovering fraud in auditing year-end cash. Choose the best response.

a. Which of the following is one of the better auditing techniques to detect kiting?

(1) Prepare year-end bank reconciliations.

(2) Prepare a schedule of bank transfers from the client's books.

(3) Review composition of authenticated deposit slips.

(4) Review subsequent bank statements and cancelled cheques received directly from the banks.

b. The cashier of Baker Company Ltd. in Yorkton, Saskatchewan, covered a shortage in the branch petty cash fund with cash obtained on December 31 from a bank in Yorkton by cashing an unrecorded cheque drawn on the Regina branch of another bank used by the company. The auditor would discover this manipulation by

(1) preparing independent bank reconciliations as of December 31.

(2) confirming the December 31 bank balances.

(3) counting the petty cash fund at the close of business on December 31.

(4) investigating items returned with the bank cutoff statements.