J.	Obtain bank confirmation.
K.	Trace deposits in transit to cutoff bank statements to determine deposit date.
L.	Foot outstanding check list.
M.	Verify the bank reconciliation, including cash disbursements for all material uncleared outstanding checks.
N.	Trace all checks dated on or before June 30 that cleared with the cutoff bank statement to the June 30 outstanding check list.
O.	Trace all interbank transfers to accounting records.
P.	Verify the bank reconciliation by tracing checks dated on or before June 30 in the cash disbursements journal to checks clearing with the June 30 bank statement. Any checks not clearing should be included on the June 30 outstanding check list.

Misstatement

Motivation

1.

A check was omitted from the outstanding check list on the June 30 bank reconciliation. It cleared the bank July 7.

2.

Cash receipts collected on accounts receivable from July 1 to July 5 were included as June 29 and 30 cash receipts.

3.

A check that was dated June 26 and disbursed in June was not recorded in the cash disbursements journal, but it was included as an outstanding check on June 30.

4.

A check was omitted from the outstanding check list on the bank reconciliation. It cleared the bank September 6.

5.

The outstanding checks on the June 30 bank reconciliation were underfooted by $2,000.

6.

A loan from the bank on June 26 was credited directly to the client's bank account. The loan was not entered as of June 30.

7.

A bank transfer recorded in the accounting records on July 1 was included as a deposit in transit on June 30.

Part 2

Requirement b.What control can be instituted for each fraud to reduce the likelihood of occurrence?

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(Click the icon to view the internal control choices. Each choice may be used more than once.)

Misstatement		Internal Control
1.	A check was omitted from the outstanding check list on the June 30 bank reconciliation. It cleared the bank July 7.
2.	Cash receipts collected on accounts receivable from July 1 to July 5 were included as June 29 and 30 cash receipts.
3.	A check that was dated June 26 and disbursed in June was not recorded in the cash disbursements journal, but it was included as an outstanding check on June 30.
4.	A check was omitted from the outstanding check list on the bank reconciliation. It cleared the bank September 6.
5.	The outstanding checks on the June 30 bank reconciliation were underfooted by $2,000.
6.	A loan from the bank on June 26 was credited directly to the client's bank account. The loan was not entered as of June 30.
7.	A bank transfer recorded in the accounting records on July 1 was included as a deposit in transit on June 30.

Part 3

Requirement c. List an audit procedure that can be used to discover each fraud.

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(Click the icon to view the audit procedure choices.)

Misstatement		Audit Procedure
1.	A check was omitted from the outstanding check list on the June 30 bank reconciliation. It cleared the bank July 7.
2.	Cash receipts collected on accounts receivable from July 1 to July 5 were included as June 29 and 30 cash receipts.
3.	A check that was dated June 26 and disbursed in June was not recorded in the cash disbursements journal, but it was included as an outstanding check on June 30.
4.	A check was omitted from the outstanding check list on the bank reconciliation. It cleared the bank September 6.
5.	The outstanding checks on the June 30 bank reconciliation were underfooted by $2,000.
6.	A loan from the bank on June 26 was credited directly to the client's bank account. The loan was not entered as of June 30.
7.	A bank transfer recorded in the accounting records on July 1 was included as a deposit in transit on June 30.