Final answer:
The most effective auditing technique to detect kiting between intercompany banks is to prepare a schedule of bank transfers. This technique allows auditors to trace fund transfers and ensure they are recorded correctly, revealing possible kiting practices.
Step-by-step explanation:
The question is inquiring about which auditing technique would be most effective in detecting kiting between intercompany banks. Kiting is a form of fraud that involves the transfer of funds between two or more bank accounts to make it appear as if a balance is higher than it actually is, usually at the year-end to inflate financial statements.
The best method to detect kiting is C. Prepare a schedule of bank transfers. This technique involves tracing transfers near the year end and ensuring they are recorded in the correct period. It helps to reveal any discrepancies between the time a deposit is recorded in one account and the corresponding withdrawal is documented in another account.
Other techniques mentioned in the options, such as reviewing authenticated deposit slips, bank statements, and preparing year-end bank reconciliations, are also important in a thorough audit process but are less specific to identifying kiting.