Cleared check 2233 for 5000 has been erased and the bank balance has been

# Cleared check 2233 for 5000 has been erased and the

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Cleared check 2233 for \$5,000 has been erased, and the bank balance has been changed from \$2,374.93 to \$7,374.93. The bank balance is actually \$5,000 lower than the reconciliation shows. Because the problem says “all checks entered in Caulco’s cash disbursements journal through February 29 have either cleared the bank or are listed as outstanding checks in the February bank reconciliation,” the conclusion is that this \$5,000 check was not recorded. Students can find the alteration several ways. They can (1) notice the check (!) and find that it is not on the bank statement even though it is dated and cleared in February, (2) add the checks listed in the February bank statement and find that the total is \$5,838.29, not the \$10,838.29 shown on the bank statement, and the number of checks (25) does not match the bank statement (26), (3) add the previous balance to the deposit and subtract the withdrawals to find a balance of \$2,374.93 instead of the altered \$7,374.93, and (4) notice the skip in the numerical sequence not noted by the bank’s double asterisk (**) used to indicate a skip (this is the place the paid check was erased). Also, the “low bank balance” figure of \$2,374.93 gives it away. CAULCO, INC. Bank Reconciliation (Corrected) February 28 Balance per bank ................................................................................................ \$ 2,374.93 Deposit in transit ................................................................................................ 1,097.69 Outstanding Checks: Number Date Payee Amount 2239 Feb 26 Alpha Supply 500.00 2240 Feb 29 L.C. Statement 254.37 Total Outstanding (754.37) Reconciled balance \$ 2,718.25 General ledger balance Feb 28 \$ 7,718.25 Cash overstatement, Check 2233 not recorded \$ 5,000.00 6-18
Chapter 06 - Employee Fraud and the Audit of Cash 6.51 Investigating a Fraud If the company is local, visit the location to determine whether the company exists. Obtain the checks used to pay the vendor to determine the bank used by the vendor (information should be on the back of the check). Match the vendor invoices to receiving reports to determine whether product was received. Match the invoices to purchase orders and purchase requisition to determine whether purchase orders exist and that material was requested. If purchase orders or requisitions come from the same person, check the bank used by that person (from the direct deposit information or the back of their paycheck) to see whether it is the same bank as the vendor (or maybe even the same account). Check the county court house for information on the business. Of course, depending on the facts and circumstances, other procedures may also be valid. 6.52 Audit Simulation: Fraud in Purchasing a. It is likely that a purchasing agent has created a shell company (K. A. Supplies) and is awarding bids to it. Once the bid is awarded, someone purchases the necessary materials and sends them to Big Builders at a marked-up price. b. We might obtain information about the bank account used by K. A. Suppliers. This information would be available on the back of the checks we used to pay K. A. Suppliers. We may wish to do an analysis of the business we do with K. A. Supplier.

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• Spring '13
• James
• ........., employee fraud, Audit of Cash