Possible Misstatements Due to Errors and List of Auditing Procedures

Fraud
a. The auditor suspects that a kitting E. Prepare a bank transfer schedule
scheme exists because an accounting
department employee who can issue
and record checks seems to be leading
and unusually luxurious lifestyle.
b. An auditor suspects that the controller D. Obtain the cutoff bank statement and
wrote several checks and recorded the compare the cleared checks to the year-
cash disbursements just before year-end end bank reconciliation.
but did not mail the checks until after
the first week of the subsequent year.
c. The entity borrowed funds from a H. Confirm the terms of borrowing
financial institution. Although the arrangements with the lender.
transaction was properly recorded, the
auditor suspects that the loan created a
lien on the entity’s real estate that is not
disclosed in its financial statements.
d. The auditor discovered an unusually K. Send a second request for confirmation
large receivable from one of the entity’s of the receivable to the customer and make
new customers. The auditor suspects inquiries of a reputable credit agency
that the receivable may be fictitious concerning the customer’s
because the auditor has never heard of creditworthiness.
the customer and because the auditor’s L. Examine the entity’s shipping documents
initial attempt to confirm the receivable to verify that the merchandise that
has been ignored by the customer. produced the receivable was actually sent
to the customer.