Digital Solutions Ltd is a large company involved in a number of technology projects, including mobile networks and digital equipment. Digital Solutions has created a number of subsidiaries to concentrate on specific aspects of Digital Solutions activities. While digital Solutions and its subsidiaries each have an individual bank account, all of the main banking activities of the group are undertaken through the bank account of Digital Solutions. Jacinda Barker, the senior banking clerk of Digital Solutions maintains and monitors all of the accounts. Your preliminary discussions with Jacinda indicate the following:

- The proceeds of the technology operations are deposited in the subsidiaries bank accounts.

- Digital Solutions pays all expenses of the group, including the costs of the technology operations.

- Each subsidiary reimburses Digital Solutions on a quarterly basis for costs associated with its activities and also pays it a management fee. Payments are completed via a direct transfer between the bank accounts. The transfer is authorised by the chief financial officer (CFO) of Digital Solutions and the chief executive officer (CEO) of the relevant subsidiary.

- Jacindas responsibilities include preparing a schedule of transfers each quarter and reconciling each of the bank accounts.

Required

a. Explain which assertions are most likely to be assessed as high risk for material misstatement for the cash balances of Digital Solutions and its subsidiaries.

b. Outline three substantive audit procedures that may be used to test whether these risks will result in a material misstatement and indicate the assertion addressed.