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2012-03-25 13:17:36

Auditing Chapter 6 terms
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  1. check kiting
    the practice of building up balances in one or more bank accounts based on uncollected (float) checks drawn against similar accounts in other banks
  2. cutoff bank statement
    a client bank statement (usually sent directly to the auditor) that includes all paid checks and deposits slips through a certain date, usually the middle of the month
  3. direct-effect illegal acts
    violations of laws or government regulations by the company or its management or employees that produce direct and material effects on dollar amounts in financial statements
  4. embezzlement
    a type of fraud involving employees or nonemployees wrongfully taking money or property entrusted to their care, custody, and control, often accompanied by false accounting entries and other forms of lying and cover-up
  5. employee fraud
    (defalcation or missappropriation of assets)
    the use of fraudulent means to take money or other property from an employer. It consists of three phases: (1) the fraudulent act, (2) the conversion of the money or property to the fraudster's use, and (3) the cover-up
  6. errors
    unintentional misstatements or omissions of amounts or disclosure in financial statements
  7. fidelity bond
    an insurance policy that covers most kinds of cash embezzlement losses
  8. fraud
    knowingly making material misrepresentations of fact with the intent of inducing someone to believe the falsehood and act upon it and, thus, suffer a loss of damage
  9. lapping
    the theft of a payment and the application of subsequent payments to cover the theft
  10. larceny
    simple theft of an employer's property tha tis not entrusted to an employee's care, custody, or control
  11. lockbox
    an arrangement in whic a fiduciary receives the payments, lists the receipts, deposits the money, and sends the remittance advices (stubs showing the amount received from each customer) to the company
  12. management fraud
    deliberate fraud committed by management that injures investors and creditors through materially misleading information
  13. motive
    pressure experienced by a person and believed unshareable with friends and confidants
  14. proof of cash
    a reconciliation in which the bank balance, the bank report of cash deposited, and the bank report of cash paid are all reconciled to the company's general ledger and cash receipts and disbursements journals
  15. schedule of interbank transfers
    an analysis used to determine whether transfers of cash from one bank to another were recorded properly (correct amount and correct date)