Question

If an auditor waits until the subsequent period bank statement is available to verify reconciling items, it is primarily a test for:

A) errors.
B) omissions.
C) kiting.
D) intentional misstatements.

Answer 1

An auditor waiting for subsequent period bank statements primarily tests for kiting, a fraudulent activity aimed at inflating bank balances.

Step-by-step explanation:

If an auditor waits until the subsequent period bank statement is available to verify reconciling items, it is primarily a test for kiting. Kiting is a form of fraud that involves inflating bank balances by creating false balances, often by transferring money between different bank accounts near the reporting period end to make it appear as though there are more funds available than what truly exists. By checking the subsequent period bank statement, auditors can ensure that checks included in the ending cash balance of the prior period have cleared and that there are no unexpected reconciling items that may indicate kiting has occurred.