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Bronys Bikes maintains two general demand deposit bank accounts and an imprest payroll account. One of the general bank accounts and the payroll account are
- Brony’s Bikes maintains two general demand deposit bank accounts and an imprest payroll account. One of the general bank accounts and the payroll account are with Dallas Dollar Bank. The second demand deposit account is with Bank Two, the Chicago bank from which Brony’s Bikes obtained the $45 million loan referred to in Module I. As part of the cash audit, Derick has asked you to reperform the reconciliation of all three of the bank accounts for December 20X9, and to do an analysis of inter-bank transfers between Dollar Bank and Bank Two. Recall that Brony’s Bikes has reconciled all bank accounts for each of the 12 months. You will begin, therefore, with the company’s documentation of its December 20X9 reconciliations. Requirements 1. Using the Excel file labeled “20X9 Bank.xlxs.” Briefly examine the following documentation in this file: WP 1.A - Cash on hand and in banks; WP 1.B - Bank reconciliation—Dallas Dollar Bank; and WP 1.C - Inter-bank transfer schedule. Scroll to WP 1.B, “Bank Reconciliation—Dallas Dollar Bank.” Does the Dollar Bank account reconcile for December? What are the possible causes for nonreconciliation? 2. In tracing cash disbursements from the December check register to the bank statement, you learn that check 44264, in the amount of $642,752, was recorded incorrectly as $651,752. Incorporate this misstatement into the appropriate section of the bank reconciliation. Does the account reconcile after you have made this correction? Assuming check 44264 was in payment of accounts payable (refer to Exhibit BB.16), draft the necessary audit adjustment at the bottom of your document. 3. Scroll to WP 1.B and record the audit adjustment in the “audit adjustments” column of the lead schedule. 4. The deposit in transit, as well as all but the last two checks outstanding at December 31, cleared with the bank cutoff statement. What specific audit objectives does obtaining a cutoff statement directly from the bank support? If the cutoff bank statement covered the period 1/1/Y0 through 1/21/Y0 and the deposit in transit was credited by the bank on 1/12/Y0, would you be concerned? If so, why? What additional procedures would you apply to allay your concerns? Note on document WP 1.B that Dollar Bank credited the deposit in transit on 1/3/Y0.
WP 1.A Brony's Bikes
Prepared by:
Cash on Hand and in Banks
Date:
December 31, 20X9
Reviewed by:
Date:
12/31/20X8 12/31/20X9 Audit
12/31/20X9
Audited Balance Per Ledger Adjustments Reclassifications Audited
Bank Two Demand Deposit
$0 $10,200,000
$3,000,000 $7,200,000 1.A and 1.C
Dallas Dollar Bank Demand Deposit
$15,741,000 $2,100,000 $9.000
$2,100,000 1.B
Dallas Dollar Bank Payroll Account
$55,000 $57,000
$57,000 1.D
Petty Cash
$4,000 $5,000
$5,000 1.E
- - - - -
$40,524,000 $12,362,000 $0 $3,000,000 $9,371,000
= = = = =
WTB 1
WP 1.B Brony's Bikes
Prepared by:
Bank Reconciliation-Client Prepared Date:
Dallas Dollar Bank
Reviewed by:
December 31, 20X9
Date:
12/31/X9 Balance per bank statement
$3,952,562 C 12/31/X9 Balance per general ledger- $2,100,132
Add deposits in transit
$4,671,958 > unadjusted
-
$8,624,520
Deduct bank charges ($132) A Deduct outstanding checks:
44662
$573,122 >
Audit adjustment No. 7
44665
$76,987 >
44669
$864,211 >
-
44672
$111,900 >
12/31/X9 Adjusted balance
$2,100,000 G 44677
$237,000 >
=
44678
$290,000 >
WP 1
44679
$422,300 >
44680
$1,340,000 >
44681
$6,500 >
44682
$1,600,000 >
44683
$326,000
44684
$667,500
-
$6,515,520
-
12/31/X9 Adjusted balance
$2,109,000
=
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Auditing and Assurance services an integrated approach
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
14th Edition
133081605, 132575957, 9780133081602, 978-0132575959
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| WP 1.A Brony's Bikes | Prepared by: | |||||||
| Cash on Hand and in Banks | Date: | |||||||
| December 31, 20X9 | Reviewed by: | |||||||
| Date: | ||||||||
| 12/31/20X8 | 12/31/20X9 | Audit | 12/31/20X9 | |||||
| Audited Balance | Per Ledger | Adjustments | Reclassifications | Audited | ||||
| Bank Two Demand Deposit | $0 | $10,200,000 | $3,000,000 | $7,200,000 | 1.A and 1.C | |||
| Dallas Dollar Bank Demand Deposit | $15,741,000 | $2,100,000 | $9.000 | $2,100,000 | 1.B | |||
| Dallas Dollar Bank Payroll Account | $55,000 | $57,000 | $57,000 | 1.D | ||||
| Petty Cash | $4,000 | $5,000 | $5,000 | 1.E | ||||
| - | - | - | - | - | ||||
| $40,524,000 | $12,362,000 | $0 | $3,000,000 | $9,371,000 | ||||
| = | = | = | = | = | ||||
| WTB 1 | ||||||||
| WP 1.B Brony's Bikes | Prepared by: | |||||||
| Bank Reconciliation-Client Prepared | Date: | |||||||
| Dallas Dollar Bank | Reviewed by: | |||||||
| December 31, 20X9 | Date: | |||||||
| 12/31/X9 Balance per bank statement | $3,952,562 | C | 12/31/X9 Balance per general ledger- | $2,100,132 | ||||
| Add deposits in transit | $4,671,958 | > | unadjusted | |||||
| - | ||||||||
| $8,624,520 | Deduct bank charges | ($132) | A | |||||
| Deduct outstanding checks: | ||||||||
| 44662 | $573,122 | > | Audit adjustment No. 7 | |||||
| 44665 | $76,987 | > | ||||||
| 44669 | $864,211 | > | - | |||||
| 44672 | $111,900 | > | 12/31/X9 Adjusted balance | $2,100,000 | G | |||
| 44677 | $237,000 | > | = | |||||
| 44678 | $290,000 | > | WP 1 | |||||
| 44679 | $422,300 | > | ||||||
| 44680 | $1,340,000 | > | ||||||
| 44681 | $6,500 | > | ||||||
| 44682 | $1,600,000 | > | ||||||
| 44683 | $326,000 | |||||||
| 44684 | $667,500 | |||||||
| - | ||||||||
| $6,515,520 | ||||||||
| - | ||||||||
| 12/31/X9 Adjusted balance | $2,109,000 | |||||||
| = |
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Auditing and Assurance services an integrated approachAuthors: Alvin a. arens, Randal j. elder, Mark s. Beasley 14th Edition 133081605, 132575957, 9780133081602, 978-0132575959 | |||||||
