Chapter 05 - Audit Evidence and Documentation

Chapter 05 Audit Evidence and

Documentation Answer Key

True / False Questions

1. The professional standards consider

calculating depreciation expense a
"routine" transaction.
FALSE

Difficulty: Hard

2. The most reliable form of documentary

evidence generally is considered to be
documents created by the client.
FALSE

Difficulty: Medium

3. A vendor's invoice is an example of

documentary evidence created by a third
party and held by the client.
TRUE

Difficulty: Medium

4. In performing analytical procedures, the

auditors may use dollar amounts, physical
quantities, or percentages.
TRUE

Difficulty: Medium

5-1
Chapter 05 - Audit Evidence and Documentation

5. The primary purpose of a letter of

representations is to obtain additional
evidence about specific accounts.
FALSE

Difficulty: Hard

6. The auditors should propose an

adjusting journal entry for all material
related-party transactions.
FALSE

Difficulty: Hard

7. When the risk of material misstatement

for an account is high, the auditors may
perform additional substantive procedures
to restrict detection risk to a lower level.
TRUE

Difficulty: Medium

8. Working papers of continuing audit

interest usually are filed with the
administrative working papers.
FALSE

Difficulty: Medium

9. The use of lead schedules is designed to

increase the detail of the working trial
balance.
FALSE

Difficulty: Easy

5-2
Chapter 05 - Audit Evidence and Documentation

12. The components of the risk of

10. Adjusting journal entries are ordinarily misstatement are:
recorded by the client, while reclassifying
journal entries need not be recorded.
TRUE

Difficulty: Medium

Multiple Choice Questions A. Option A

B. Option B
C. Option C
11. To be effective, analytical procedures D. Option D
in the overall review stage of an audit
engagement should be performed by.
A. The staff accountant who performed the
Difficulty: Medium
substantive auditing procedures.
B. A beginning staff accountant who has
had no other work related to the
engagement.
C. A manager or partner who has a
comprehensive knowledge of the client's
business and industry.
D. The CPA firm's quality control
manager.

Difficulty: Medium

5-3
Chapter 05 - Audit Evidence and Documentation

15. When performing a financial statement

13. Financial statement assertions are audit, auditors are required to explicitly
established for classes of transactions, assess the risk of material misstatement
due to:
A. Fraud.
B. Misappropriation.
C. Illegal Acts.
D. Business risk.

Difficulty: Hard
A. Option A
B. Option B
C. Option C
D. Option D

Difficulty: Easy

14. Which of the following is correct

concerning a "fraud risk factor"?
A. It may affect the auditor's assessment of
fraud risk.
B. It requires modification of planned audit
procedures.
C. It is also a material weakness in internal
control.
D. If it involves senior management, it is
likely to result in resignation of the auditor.

Difficulty: Hard

5-4
Chapter 05 - Audit Evidence and Documentation

16. As planning materiality is decreased,

the auditor should plan more work on
individual accounts to.
A. Find smaller misstatements.
B. Find larger misstatements.
C. Increase the tolerable misstatement in
the accounts.
D. Decrease the risk of assessing control
risk too low.

Difficulty: Medium

17. Further audit procedures include:

A. Option A
B. Option B
C. Option C
D. Option D

Difficulty: Medium

18. Assertions that have a meaningful

bearing on whether an account balance,
transaction class or disclosure is fairly
stated are referred to as:
A. Appropriate assertions.
B. Sufficient assertions.
C. Relevant assertions.
D. Reliable assertions.

Difficulty: Medium

5-5
Chapter 05 - Audit Evidence and Documentation

22. An auditor plans to apply substantive

19. Which of the following is not an tests to the details of asset and liability
assertion relating to classes of accounts as of an interim date rather than
transactions? as of the balance sheet date. The auditor
A. Accuracy. should be aware that this practice
B. Sufficiency. A. Eliminates the use of certain statistical
C. Cutoff. sampling methods that would otherwise be
D. Classification. available.
B. Presumes that the auditor will reperform
the tests as of the balance sheet date.
C. Should be especially considered when
Difficulty: Medium
there are rapidly changing economic
conditions.
20. Which of the following is required D. Potentially increases the risk that errors
documentation in an audit? that exist at the balance sheet date will not
A. A written engagement letter formalizing be detected.
the level of services to be provided.
B. A flowchart of the client's organization.
C. A written audit program. Difficulty: Hard
D. A memo setting forth the scope of the Source: AICPA

audit.

Difficulty: Hard

21. Which of the following is not

considered to be an analytical procedure?
A. Comparisons of financial statement
amounts with source documents.
B. Comparisons of financial statement
amounts with nonfinancial data.
C. Comparisons of financial statement
amounts with budgeted amounts.
D. Comparisons of financial statement
amounts with comparable prior year
amounts.

Difficulty: Medium

5-6
Chapter 05 - Audit Evidence and Documentation

25. The auditors of Smith Electronics wish

23. An auditor compared the current-year to limit the audit risk of material
gross margin with the prior-year gross misstatement in the test of accounts
margin to determine if cost of sales is receivable to 5 percent. They believe that
reasonable. What type of audit procedure inherent risk is 100%, and there is a 40%
was performed? risk that material misstatement could have
A. Test of transactions. bypassed the client's system of internal
B. Analytical procedures. control. What is the maximum detection
C. Test of controls. risk the auditors should specify in their
D. Test of details. substantive procedures of details of
accounts receivable?
A. 5%.
B. 12.5%.
Difficulty: Easy
Source: AICPA C. 42.7%.
D. 60%.

24. The inspection of a vendor's invoice by

the auditors is: Difficulty: Medium
A. Direct evidence about occurrence of a
transaction.
B. Physical evidence about occurrence of a 26. Analytical procedures are required at
transaction. the planning stage of all audits and as:
C. Documentary evidence about A. Tests of internal control.
occurrence of a transaction. B. Substantive procedures.
D. Part of the client's accounting system. C. A part of the final overall review.
D. Computer generated procedures.

Difficulty: Medium

Difficulty: Easy

5-7
Chapter 05 - Audit Evidence and Documentation

30. Which of the following best describes

27. During financial statement audits, the problem with the use of published
auditors seek to restrict which type of industry averages for analytical
risk? procedures?
A. Control risk. A. Lack of comparability.
B. Detection risk. B. Lack of sufficiency.
C. Inherent risk. C. Lack of accuracy.
D. Account risk. D. Lack of availability.

Difficulty: Medium Difficulty: Medium

28. Which of the following groups are not

considered a specialist by AICPA
Professional Standards:
A. Appraisers.
B. Internal auditors.
C. Engineers.
D. Geologists.

Difficulty: Medium

29. CPA wishes to use a representation

letter as a substitute for performing other
audit procedures. Doing so:
A. Violates professional standards.
B. Is acceptable, but should only be done
when cost justified.
C. Is acceptable, but only for non-public
clients.
D. Is acceptable and desirable under all
conditions.

Difficulty: Easy

5-8
Chapter 05 - Audit Evidence and Documentation

33. Which of the following best describes

31. In auditing an asset valued at fair the reason that auditors are concerned with
value, which of the following potentially the detection of related party transactions?
provides the auditor with the strongest A. The financial statements must often be
evidence? adjusted for the effects of material related
A. A price for a similar asset obtained party transactions.
from an active market. B. Material related party transactions must
B. An appraisal obtained discounting be disclosed in the notes to the financial
future cash flows. statements.
C. Management's judgment of the cost to C. The substance of related party
purchase an equivalent asset. transactions will differ from their form.
D. The historical cost of the asset. D. In a related party transaction one party
has the ability to exercise significant
influence over the other party.
Difficulty: Medium

Difficulty: Hard
32. An auditor should expect that fair value
is the price that would be received to sell
an asset in an orderly transaction between 34. Which of the following is not a basic
the market participants at the: procedure used in an audit?
A. Acquisition date of the asset. A. Risk assessment procedures.
B. Audit report date. B. Substantive procedures.
C. Expected replacement date of the asset. C. Tests of controls.
D. Measurement date (ordinarily the date D. Tests of direct evidence.
of the financial statements).

Difficulty: Medium
Difficulty: Medium

5-9
Chapter 05 - Audit Evidence and Documentation

37. Which of the following is true about

35. Which of the following is not a analytical procedures?
financial statement assertion relating to A. Performing analytical procedures
account balances? results in the most reliable form of
A. Completeness evidence.
B. Existence. B. Analytical procedures are tests of
C. Rights and obligations. controls used to evaluate the quality of a
D. Valuation and allowances. client's internal control.
C. Analytical procedures are used for
planning, but they should not be used to
obtain evidence as to the reasonableness of
Difficulty: Hard
specific account balances.
D. Analytical procedures are used in
36. Which of the following is generally planning, as a substantive procedure for
true about the sufficiency of audit specific accounts, and in the final review
evidence? of the audited financial statements.
A. The amount of evidence that is
sufficient varies inversely with the risk of
material misstatement. Difficulty: Medium
B. The amount of evidence concerning a
particular account varies inversely with the
materiality of the account.
C. The amount of evidence concerning a
particular account varies inversely with the
inherent risk of the account.
D. When evidence is appropriate with
respect to an account it is also sufficient.

Difficulty: Hard

5-10
Chapter 05 - Audit Evidence and Documentation

41. An auditor is performing an analytical

38. Which of the following is a basic procedure that involves developing
approach often used by auditors to evaluate common-size financial statements. This
the reasonableness of accounting technique is referred to as:
estimates? A. Vertical analysis.
A. Confirmation. B. Horizontal analysis.
B. Observation. C. Cross-sectional analysis.
C. Reviewing subsequent events or D. Comparison analysis.
transactions.
D. Analyzing corporate organizational
structure. Difficulty: Easy

Difficulty: Hard

39. An auditor is performing an analytical

procedure that involves comparing a
client's account balances over time. This
technique is referred to as:
A. Vertical analysis.
B. Horizontal analysis.
C. Cross-sectional analysis.
D. Comparison analysis.

Difficulty: Easy

40. An auditor is performing an analytical

procedure that involves comparing a
client's ratios with other companies in the
same industry. This technique is referred to
as:
A. Vertical analysis.
B. Horizontal analysis.
C. Cross-sectional analysis.
D. Comparison analysis.

Difficulty: Easy

5-11
Chapter 05 - Audit Evidence and Documentation

45. Which of the following is not a

42. Which of the following is not a basic function of working papers?
approach often used by auditors to evaluate A. Provide support for the auditors' report.
the reasonableness of accounting B. Provide support for the accounting
estimates? records.
A. Confirmation of amounts. C. Aid partners in planning and conducting
B. Review of management's process of future audits.
development. D. Document staff compliance with
C. Independent development of an generally accepted auditing standards.
estimate.
D. Review of subsequent events.
Difficulty: Easy

Difficulty: Medium

43. The audit time budget is an example

of:
A. A supporting schedule.
B. An administrative working paper.
C. A lead schedule.
D. A corroborative working paper.

Difficulty: Easy

44. A schedule set up to combine similar

general ledger accounts, the total of which
appears on the working trial balance as a
single amount, is referred to as a:
A. Supporting schedule.
B. Lead schedule.
C. Corroborating schedule.
D. Reconciling schedule.

Difficulty: Easy

5-12
Chapter 05 - Audit Evidence and Documentation

48. The auditors must obtain written client

46. A schedule listing account balances for representations that normally should be
the current and previous years, and signed by:
columns for adjusting and reclassifying A. The president and the chairperson of the
entries proposed by the auditors to arrive at board.
the final amount that will appear in the B. The treasurer and the internal auditor.
financial statement, is referred to as a: C. The chief executive officer and the
A. Working trial balance. chief financial officer.
B. Lead schedule. D. The corporate counsel and the audit
C. Summarizing schedule. committee chairperson.
D. Supporting schedule.

Difficulty: Easy
Source: AICPA
Difficulty: Easy

49. Which of the following ultimately

47. The auditors use analytical procedures
determines the specific audit procedures
during the course of an audit. The most
necessary to provide independent auditors
important phase of performing these
with a reasonable basis for the expression
procedures is the:
of an opinion?
A. Vouching of all data supporting various
A. The audit time budget.
ratios.
B. The auditors' judgment.
B. Investigation of significant variations
C. Generally accepted accounting quality
and unusual relationships.
standards.
C. Comparison of client-computed
D. The auditors' working papers.
statistics with industry data on a quarterly
and full-year basis.
D. Recalculation of industry date.
Difficulty: Easy
Source: AICPA

Difficulty: Medium

5-13
Chapter 05 - Audit Evidence and Documentation

53. The date of the management

50. Failure to detect material dollar errors representation letter should coincide with
in the financial statements is a risk which the:
the auditors primarily mitigate by: A. Date of the auditor's report.
A. Performing substantive procedures. B. Balance sheet date.
B. Performing tests of controls. C. Date of the latest subsequent event
C. Assessing control risk. referred to in the notes to the financial
D. Obtaining a client representation letter. statements.
D. Date of the engagement agreement.

Difficulty: Easy
Source: AICPA Difficulty: Medium
Source: AICPA

51. An independent auditor finds that the

Simmer Corporation occupies office space,
at no charge, in an office building owned
by a shareholder. This finding indicates the
existence of:
A. Management fraud.
B. Related party transactions.
C. Window dressing.
D. Weak internal control.

Difficulty: Medium
Source: AICPA

52. Which of the following would not

necessarily be considered a related party
transaction?
A. Payment of a bonus to the president.
B. Purchases from another corporation that
is controlled by the corporation's chief
stockholder.
C. Loan from the corporation to a major
stockholder.
D. Sale of land to the corporation by the
spouse of a director.

Difficulty: Easy
Source: AICPA

5-14
Chapter 05 - Audit Evidence and Documentation

56. Which of the following expressions is

54. An example of an analytical procedure least likely to be included in a client's
is the comparison of: representation letter?
A. Financial information with similar A. No events have occurred subsequent to
information regarding the industry in the balance sheet date that require
which the entity operates. adjustment to, or disclosure in, the
B. Recorded amounts of major financial statements.
disbursements with appropriate invoices. B. The company has complied with all
C. Results of a statistical sample with the aspects of contractual agreements that
expected characteristics of the actual would have a material effect on the
population. financial statements in the event of
D. EDP generated data with similar data noncompliance.
generated by a manual accounting system. C. Management acknowledges
responsibility for illegal actions committed
by employees.
D. Management has made available all
Difficulty: Medium
Source: AICPA financial statements, including notes.

55. When considering the use of Difficulty: Medium

management's written representations as Source: AICPA
audit evidence about the completeness
assertion, an auditor should understand that
such representations:
A. Complement, but do not replace,
substantive procedures designed to support
the assertion.
B. Constitute sufficient evidence to support
the assertion when considered in
combination with a moderate assessed
level of control risk.
C. Are generally sufficient audit evidence
to support the assertion regardless of the
assessed level of control risk.
D. Replace the assessed level of control
risk as evidence to support the assertions.

Difficulty: Medium
Source: AICPA

5-15
Chapter 05 - Audit Evidence and Documentation

59. Which of the following is not a typical

57. Which of the following statements is analytical procedure?
generally correct about audit evidence? A. Study of relationships of the financial
A. The auditor's direct personal information with relevant nonfinancial
knowledge, obtained through observation information.
and inspection, is more persuasive than B. Comparison of the financial information
information obtained indirectly from with similar information regarding the
independent outside sources. industry in which the entity operates.
B. To be appropriate, audit evidence must C. Comparison of recorded amounts of
be sufficient. major disbursements with appropriate
C. Accounting data alone may be invoices.
considered sufficient appropriate audit D. Comparison of the financial information
evidence to issue an unqualified opinion on with budgeted amounts.
financial statements.
D. Appropriateness of audit evidence
refers to the amount of corroborative Difficulty: Medium
evidence to be obtained. Source: AICPA

Difficulty: Easy
Source: AICPA

58. Which of the following statements

relating to audit evidence is the most
accurate statement?
A. Audit evidence gathered by an auditor
from outside an enterprise is reliable.
B. Accounting data developed under
satisfactory conditions of internal control
are more relevant than data developed
under unsatisfactory internal control
conditions.
C. Oral representations made by
management are not valid evidence.
D. The auditor must obtain sufficient
appropriate audit evidence.

Difficulty: Easy
Source: AICPA

5-16
Chapter 05 - Audit Evidence and Documentation

60. Which of the following is not a

primary purpose of audit working papers?
A. To coordinate the examination.
B. To assist in preparation of the audit
report.
C. To support the financial statements.
D. To provide evidence of the audit work
performed.

Difficulty: Medium
Source: AICPA

61. Concerning retention of working

papers, the Sarbanes-Oxley Act:
A. Has no provisions.
B. Requires permanent retention.
C. Requires retention for at least 7 years.
D. Requires retention for a period of 4 or
less years.

Difficulty: Medium

62. During an audit engagement pertinent

data are prepared and included in the audit
working papers. The working papers
primarily are considered to be:
A. A client-owned record of conclusions
reached by the auditors who performed the
engagement.
B. Evidence supporting financial
statements.
C. Support for the auditors' representations
as to compliance with generally accepted
auditing standards.
D. A record to be used as a basis for the
following year's engagement.

Difficulty: Medium
Source: AICPA

5-17
Chapter 05 - Audit Evidence and Documentation

65. Working papers that record the

63. Although the quantity, type, and procedures used by the auditor to gather
content of working papers will vary with evidence should be:
the circumstances, the working papers A. Considered the primary support for the
generally would include the: financial statements being examined.
A. Copies of those client records examined B. Viewed as the connecting link between
by the auditor during the course of the the books of account and the financial
engagement. statements.
B. Evaluation of the efficiency and C. Designed to meet the circumstances of
competence of the audit staff assistants by the particular engagement.
the partner responsible for the audit. D. Destroyed when the audited entity
C. Auditor's comments concerning the ceases to be a client.
efficiency and competence of client
management personnel.
D. Auditing procedures followed and the Difficulty: Easy
testing performed in obtaining audit Source: AICPA
evidence.

Difficulty: Medium
Source: AICPA

64. The permanent file section of the

working papers that is kept for each audit
client most likely contains:
A. Review notes pertaining to questions
and comments regarding the audit work
performed.
B. A schedule of time spent on the
engagement by each individual auditor.
C. Correspondence with the client's legal
counsel concerning pending litigation.
D. Narrative descriptions of the client's
accounting procedures and controls.

Difficulty: Medium
Source: AICPA

5-18
Chapter 05 - Audit Evidence and Documentation

In preparing for an audit of the retail

66. In general, which of the following footwear division of a major retail
statements is correct with respect to organization, the auditor gathered the
ownership, possession, or access to following information about the
working papers prepared by a CPA firm in organization's stores:
connection with an audit?
A. The working papers may be obtained by
third parties where they appear to be
relevant to issues raised in litigation.
B. The working papers are subject to the
privileged communication rule which, in a
majority of jurisdictions, prevents third-
party access to the working papers.
C. The working papers are the property of
the client after the client pays the fee.
D. The working papers must be retained by
the CPA firm for a period of ten years.

Difficulty: Easy
Source: AICPA

67. Confirmation would be most effective

in addressing the existence assertion for
the:
A. Addition of a milling machine to a
machine shop.
B. Payment of payroll during regular
course of business.
C. Inventory held on consignment.
D. Granting of a patent for a special
process developed by the organization.

Difficulty: Medium
Source: AICPA

5-19
Chapter 05 - Audit Evidence and Documentation

69. Management is concerned about the

68. An auditor performs analytical lower level of profitability in the Mid-
procedures that involve comparing the Central Region. Which of the following
gross margins of various divisional would be a reasonable possible
operations with those of other divisions explanation(s) of the lower profitability for
and with the individual division's the Mid-Central Region?
performance in previous years. The auditor I. The lower number of stores in the Mid-
notes a significant increase in the gross Central Region.
margin at one division. The auditor does II. Sales employees are not as productive
some preliminary investigation and also in generating sales as those in other
notes that there were no changes in regions.
products, production methods, or III. The Mid-Central Region has a lower
divisional management during the year. gross margin.
Based on the above information, the most A. I only.
likely cause of the increase in gross margin B. II only.
would be: C. II and III only.
A. An increase in the number of D. I, II and III.
competitors selling similar products.
B. A decrease in the number of suppliers
of the material used in manufacturing the Difficulty: Medium
product. Source: IIA
C. An overstatement of year-end
inventory.
D. An understatement of year-end accounts 70. Based on the previous information,
receivable. which of the following preliminary
conclusions can the auditor use as a basis
for further investigations?
A. Sales per store are directly related to the
Difficulty: Hard size of the store.
Source: IIA
B. Sale clerks are less productive in larger
size stores.
C. Gross margin is directly related to the
size of the store.
D. Average square feet of store correlates
with the number of stores in the district.

Difficulty: Medium
Source: IIA

5-20
Chapter 05 - Audit Evidence and Documentation

72. Management has centralized

71. Which of the following statements is purchasing and uses a model based upon
not correct regarding the auditor's further previous year's sales with adjustments for
analysis? trends in the market place, e.g., the trend to
A. The Mid-Central Region has fewer more casual shoes. A staff auditor has
average full-time equivalent employees per suggested that the centralized purchasing
store than the other regions per store. may be one of the reasons for the lower
B. The other regions all generate higher level of profitability in the Mid-Central
sales per square foot than the Mid-Central Region. Which of the following would be
Region. the best single audit procedure to address
C. The Mid-Central Region has the highest the staff auditor's assertion?
average wages per full-time equivalent A. Take a sample of receiving documents
employee. at stores and trace to purchase orders to
D. The largest contributor to total determine the length of time between the
corporate profits is the Southwest Region. purchase and delivery of the goods.
B. Interview store managers in the Mid-
Central Region to determine their attitude
toward centralized purchasing.
Difficulty: Medium
Source: IIA C. Perform an inventory count at selected
stores in the Mid-Central Region and
determine if adjustments are needed to the
perpetual records.
D. Perform a product-line analysis of sales
and purchases in the Mid-Central Region
and compare with other regions.

Difficulty: Hard
Source: IIA

73. What type of transactions ordinarily

have high inherent risk because they
involve management judgments or
assumptions in formulating accounting
balances?
A. Estimation.
B. Nonroutine.
C. Qualified.
D. Routine.

Difficulty: Medium

5-21
Chapter 05 - Audit Evidence and Documentation

74. Assertions with high inherent risk are

least likely to involve:
A. Complex calculations.
B. Difficult accounting issues.
C. Routine transactions.
D. Significant judgment by management.

Difficulty: Medium

75. The date on which no information may

be deleted from audit documentation is the
A. Client's year-end.
B. Documentation completion date.
C. Last date of significant fieldwork.
D. All of the above are incorrect in that no
information may ever be deleted from
audit documentation.

Difficulty: Medium

76. In evaluating an entity's accounting

estimates, one of the auditor's objectives is
to determine whether the estimates are
A. Prepared in a satisfactory control
environment.
B. Consistent with industry guidelines.
C. Based on verifiable objective
assumptions.
D. Reasonable in the circumstances.

Difficulty: Hard
Source: AICPA

Essay Questions

5-22
Chapter 05 - Audit Evidence and Documentation

78. Audit working papers are an integral

77. Analytical procedures are substantive part of an examination in accordance with
procedures that may be used to provide generally accepted auditing standards.
evidence about specific accounts and a. Describe three major functions of the
classes of transactions. audit working papers.
a. Describe three major types of b. Distinguish between the permanent
comparisons the auditor might make in working paper file and the current working
performing analytical procedures. paper file.
b. At what stages of the audit are analytical
procedures performed and what purpose do a. The functions of audit working papers
they serve at each stage? include (only three required):
 Provide a means of assigning and
a. Comparisons made in performing coordinating audit work.
analytical procedures include (only three  Aid in review of the work.
required):  Provide support for the auditors' report.
 Comparisons with prior years' data.  Document compliance with generally
 Comparisons with budgets and forecasts. accepted auditing standards.
 Comparisons with industry statistics.  Aid in planning and conducting future
 Comparisons with nonfinancial data. audits.
 Comparisons of predictable relationships b. The permanent file is used to organize
based on past history. working papers of continuing audit interest
b. Analytical procedures may be over a number of years.
performed: The current file contains the administrative
1. During planning to identify items that and evidence working papers for the year
require more audit attention. under examination.
2. Throughout the audit as a substantive
procedure for accounts or classes of
transactions. Difficulty: Medium
3. At the conclusion of the audit for an
overall review of the audited financial
statements.

Difficulty: Medium

5-23
Chapter 05 - Audit Evidence and Documentation

79. The following is an audit working

paper prepared by an assistant on the
Williams audit:
Prepared by ___
Reviewed by ___

Required: Prepare a list of review points

as the preparer of this working. You may
assume that any other working papers
referred to appropriate. You will receive
credit for proper points you bring up and
lose credit for improper ones and
omissions.

5-24
Chapter 05 - Audit Evidence and Documentation

The working paper's deficiencies include:

 "prepared by" is not initialed ("Rev. by"
isn't either, but since we are still
performing the review it need not be).
 Title of schedule is wrong, this is not a
bank confirmation, it is a bank
reconciliation.
 The by Balance per Bank is incorrect
for two reasons. First, the balance would
not be in the general ledger. Second, the
balance per bank should be agreed to either
a bank confirmation, bank statement, or
both.
 The bank service charge should be
added, not subtracted.
 Concerning balance per books, two
things are wrong. First it is not footed in
that the  is missing. Second, it does not
foot properly.
 The tickmark ;is incorrect relating to
the deposit in transit. If it was on the
12/31/0X bank statement, it would not be a
deposit in transit.
 The description is not correct since it
should be recorded as a cash receipt as of
12/31/OX if the bank collected it prior to
year-end. It is handled on the
reconciliation properly, but the final
comment is wrong.

Difficulty: Hard

5-25