Below are various potential misstatements due to errors or fraud (1 through 7), and a list of auditing procedures (a. through h.) the auditor would consider performing to gather evidence to determine whether the error or fraud is present. 1 (Click the icon to view the list of auditing procedures.) For each possible misstatement, identify one audit procedure that would be most effective in providing evidence regarding the potential misstatement. Listed auditing procedures may be used once, more than once, or not at all. Possible Misstatement The auditor suspects that a lapping scheme exists because an accounting department employee who has access to cash receipts also maintains the accounts receivable ledger and refuses to take any 1. vacation or sick days. The auditor suspects that the entity is inappropriately increasing the cash reported on its balance sheet by drawing a check on one account and not recording it as an outstanding check on that account 2. and simultaneously recording it as a deposit in a second account. The entity's cash receipts of the first few days of the subsequent year were properly deposited in its general operating account after the year end. However, the auditor suspects that the entity recorded 3. the cash receipts in its books during the last week of the year under audit. The auditor noticed a significant increase in the number of times that petty cash was reimbursed 4. during the year and suspects that the custodian is stealing from the petty cash fund. The auditor suspects that a kiting scheme exists because an accounting department employee who 5. can issue and record checks seems to be leading an unusually luxurious lifestyle. During tests of the reconciliation of the payroll bank account, the auditor notices that a check to an 6. employee is significantly larger than other payroll checks. The auditor suspects that the controller wrote several checks and recorded the cash disbursements 7. just before year end but did not mail the checks until after the first week of the subsequent year. Audit Procedure