Question

Which of the following is one of the better auditing techniques that might be used by an auditor to detect kiting?

1) Review composition of authenticated deposit slips.
2) Review subsequent bank statements and canceled checks received directly from the banks.
3) Prepare a schedule of bank transfers.
4) Prepare year-end bank reconciliations.

Answer 1

Reviewing subsequent bank statements and canceled checks received directly from the banks is one of the better auditing techniques to detect kiting.

Step-by-step explanation:

One of the better auditing techniques that an auditor can use to detect kiting is reviewing subsequent bank statements and canceled checks received directly from the banks. This technique allows the auditor to compare the information provided by the bank with the records kept by the company, helping to identify any discrepancies.

By reviewing the bank statements and canceled checks, the auditor can verify the authenticity and accuracy of the transactions recorded by the company, as well as identify any unusual or suspicious activities that may indicate kiting.

For example, if the auditor notices a significant number of checks that appear to be rapidly deposited and then subsequently withdrawn, it could indicate kiting. Additionally, if there are delays or discrepancies between the bank's records and the company's records, it could also signal potential kiting.