Final answer:
The best technique to detect kiting is to prepare a schedule of bank transfers, which helps identify discrepancies between the movements of funds in a client's accounts and is key for uncovering this type of fraud.
Step-by-step explanation:
The best auditing technique to detect kiting would be to prepare a schedule of bank transfers from the client's books. Kiting is a fraudulent act of exploiting the time lag between the recording of a deposit in one bank account and its withdrawal in another. By preparing a schedule of bank transfers, the auditor can trace the movement of funds between accounts and identify any discrepancies that suggest the occurrence of kiting. It allows the auditor to examine the timing and amounts of transfers near the year-end, which is when such activity is most likely to occur. The other options, such as reviewing authenticated deposit slips or bank statements and canceled checks, might not be as effective in detecting kiting since they do not provide a direct analysis of the timing of transfers.
One of the better auditing techniques that could be used by an auditor to detect kiting is to review subsequent bank statements and canceled checks received directly from the bank. This helps the auditor compare the client's records with the bank's records to identify any discrepancies. By reviewing these documents, the auditor can identify any instances of kiting where checks are written against insufficient funds.
Another useful technique is to prepare a schedule of bank transfers from the client's books. This schedule helps the auditor track the movement of funds between different banks or accounts and identify any suspicious or unauthorized transfers.
Lastly, preparing a year-end bank reconciliation is also an effective technique. This allows the auditor to reconcile the client's records with the bank's records and verify the accuracy of the recorded transactions.