Blue River Faith Company has a major branch located in Hattiesburg. The branch

deposits cash receipts daily into the bank and periodically transfers the receipts to the

companys home office in Jackson. The transfers are accounted for as inter-company

entries into the home office and branch office accounts. All accounting, however, is

performed at the home office under the direction of the assistant controller. The assistant

controller is also responsible for the transfers. The controller, however, independently

reconciles the bank account each month or assigns this reconciliation to someone in the

department. Often times the assistant controller is assigned this duty. The company is

relatively small; therefore the controller is also the financial planner and treasurer for the

company. As part of the year-end audit, you are assigned the task of conducting an audit

of bank transfers. As part of the process, you are provided the following schedule of

transfers:

Date

disbursement

per Branch

Dollar

Amount

Date

deposited

Home

Office

Date Cleared Bank per

Home Office Bank

Statement

Date Cleared Bank

per Branch

Statement

12-29-2011

$80,000

12-31-2011

12-31-2011

01-07-2012

01-02-2012

$41,000

12-31-2011

12-31-2011

01-05-2012

01-05-2012

$82,000

01-03-2012

01-07-2012

01-12-2012

12-31-2011

$54,000

01-02-2012

01-03-2012

01-08-2012

01-03-2012

$11,000

01-03-2012

12-31-2011

01-05-2012

12-27-2011

$32,000

12-31-2011

12-31-2011

01-03-2012

Required:

1) Briefly explain the audit objective in obtaining the bank transfer data above which

you will use to prepare the Bank Transfer Schedule that reflects the correct

information.

2) Identify the audit procedures that would be used to test the correctness of the

clients bank transfers. Keep in mind the purpose (cutoff) of the schedule or tests.

3) Identify any adjusting journal entries that would be needed on either the home

office or branch office accounting records as a result of the preceding

transactions.

4) Indicate how each of the above transactions would be reflected on the December

31, 2011 bank statements of both the home office and the branch office. This

includes deposits in transit and outstanding checks.

5) Indicate which transactions require no adjustment. Indicate which transactions

indicate kiting. Indicate which transactions represent errors in cash classification

but not in dollar amount for the consolidated/combined cash for the overall

company as a whole.