Deposits recorded as cash receipts near the end of the year, deposited in the bank in the same month and included in the bank reconciliation as a deposit in transit, are a type of misstatement in cash that will not normally be discovered as part of the audit of tests of a bank reconciliation.

Question

Quizplus · Accepted Answer

Deposits recorded as cash receipts and included in the bank reconciliation as deposit in transit are not discovered in the audit of bank reconciliation as they are considered to be a timing difference. These deposits will be cleared in the subsequent period, and the auditor needs to ensure that they are indeed cleared in the subsequent period to avoid misstatement in the financial statements.

Deposits Recorded as Cash Receipts near the End of the Year