An auditor should trace cancelled cheques and cleared deposits for the last part of the current audit period and the first part of the subsequent period to detect whether ________.

Question

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Tracing cancelled cheques and cleared deposits can help detect kiting, which is a type of fraud where a company writes cheques or makes deposits between accounts to artificially inflate their cash balance. By tracing these transactions, an auditor can identify if kiting has occurred and the company has overstated their cash balance. The other options listed are not directly related to tracing cancelled cheques and cleared deposits.

An Auditor Should Trace Cancelled Cheques and Cleared Deposits for the Last