QUESTION 1: (3 Marks)Answer the following questions:

(1) When performing a bank reconciliation, is the adjustment required to the bank statement an increase or a decrease where there is an outstanding cheque to account for?

(2) Z Company has two bank accounts, A and B. A transfer is made from A to B. When performing extended cash procedures, would an auditor find Zs overall cash position overstated or understated when a transfer is recorded on or before balance date in account A but after balance date in account B?

(3) Would an auditor perform a review of subsequent payments because he/ she was concerned that a liability was over-stated or under-stated?