Module IX: Analysis of Interbank Transfers Requirements 1. Using the Excel file labeled “20X9 Bank.xls” Scroll to WP 1.C, “Inter-bank Transfer Schedule.” Cheryl Lucas, a member of the Vaughan & Co. audit team, prepared this document. As part of your audit training, Derick asks that you examine and review the document and determine the need for possible audit adjustments and reclassifications. a. What is the purpose of analyzing inter-bank transfers for a short period before and after the balance sheet date? b. Identify possible audit adjustments and reclassifications by examining WP 1.C. Assume that Bank Two check 127332 was dated December 31, 20X9, deposited on that date, and also credited by Dollar Bank on December 31, 20X9. c. As noted previously, Lawton had borrowed $3 million from Brony’s Bikes in April 20X8, and had planned to repay the loan before December 31, 20X9. Did he really repay the loan in December? Do you think the check drawn on Bank Two was reflected as an outstanding check in the 12/31/X9 Bank Two reconciliation? Do you think the check was recorded as a December disbursement? If not, why not? (Hint: Remember that the loan agreement with Bank Two requires a $10 million compensating balance at all times.) 2. Draft Audit Reclassification B at the bottom of WP 1.C. 3. Scroll to WP 1.A. Record Reclassification B from requirement (2) in the reclassification column of the lead schedule. Does the reclassification place Brony’s Bikes in default on the loan agreement? If so, what further audit procedures might you elect to apply at this time?