Question

Kiting would least likely be detected by:

1) Analyzing details of large cash deposits around year-end.
2) Comparing customer remittance advices with recorded disbursements in the cash disbursements journal.
3) Preparing a four-column bank reconciliation for all major cash accounts.
4) Preparing a schedule of interbank transfers by using the client's records and bank statements around year-end.

Answer 1

Kiting can be detected by analyzing details of large cash deposits, comparing customer remittance advices, preparing a bank reconciliation, and reviewing interbank transfers.

Step-by-step explanation:

Kiting is a fraudulent method where someone artificially inflates the balance of their bank account by exploiting the time it takes for checks to clear. In order to detect kiting, certain procedures can be followed:

1. Analyzing details of large cash deposits around year-end: By examining the timing and nature of cash deposits, any suspicious activity related to kiting can be identified.
2. Comparing customer remittance advices with recorded disbursements in the cash disbursements journal: This involves verifying that the recorded disbursements match with the customer remittance advices, helping to uncover any fraudulent activity.
3. Preparing a four-column bank reconciliation for all major cash accounts: This process compares the bank statement balances, the adjusted book balances, and unreconciled items, which can reveal inconsistencies and potential kiting activities.
4. Preparing a schedule of interbank transfers by using the client's records and bank statements around year-end: This step involves cross-referencing the interbank transfers recorded in the client's records with the related bank statements to identify any suspicious activity.