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Unformatted text preview: To Document—Existence (Overstatements) Insight 18: Cash Tools Tool Primary Purpose 1. Bank confirmation Verify Cash and loan payable balances 2. Proof of cash Identify transactions handled differently by books and bank 3. Bank cutoff statement Verify reconciling items on year end bank reconciliation 4. Bank transfer schedule Detect kiting Insight 19: Improper transfers 1. Books—different periods. 2. Bank—one period (but not both) before books. Insight 20 : Accounts Receivable primary evidence: • Confirm • Examine cash receipts after year-end • Examine evidence to determine sale and any related allowances (returns, discounts, bad debts)? Insight 21 Kiting: Use “float period” to overstate cash Lapping: Steal, then hide by delaying recording of cash receipts Insight 22: Inventory approach • Observe counting, • Agree inventory counts to inventory tabulation, • Test costing (“pricing”) and footing of tabulation • Do they own it?...
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This note was uploaded on 09/08/2010 for the course BUS 129A at San Jose State.