Assume that an auditor notes a large series of checks that does not clear the bank for an unusually long time after period end.Which of the following would the auditor likely suspect from this observation?
A)Vendors are eager to get their payments.
B)The reconciliation is accurate.
C)Cash does not exist.
D)The presence of held checks at period-end.

Question

Quizplus · Accepted Answer

If a large series of checks does not clear the bank for an unusually long time after the period end, it could indicate the presence of held checks at period-end. This could be a red flag indicating that the company is trying to manage its cash balance and may not have sufficient funds to cover the checks that have been issued. The auditor would need to investigate further to determine the cause of the held checks and whether there is a risk of material misstatement in the financial statements due to this issue. The other choices are unlikely to be the cause of the observation.

Assume That an Auditor Notes a Large Series of Checks