Reply To: The Random Post Thread (Game Potential)
Which of the following procedures would an auditor most likely perform in auditing the statement of cash flows?
A: Compare the amounts included in the statement of cash flows to similar amounts in the prior year’s statement of cash flows.
B: Reconcile the cutoff bank statements to verify the accuracy of the year-end bank balances.
C: Vouch all bank transfers for the last week of the year and first week of the subsequent year.
D: Reconcile the amounts included in the statement of cash flows to the other financial statements’ balances and amounts.
That’s right! The answer is…
D. The statement of cash flows presents amounts for financing and investing activities, which come from changes in balance sheet accounts, and operating activities, which come from income statement accounts. Therefore, the auditor, in auditing the statement of cash flows, would reconcile the amounts shown in that statement to the other financial statements. Answer (a) is incorrect because cash flow activities typically vary from year to year and do not follow predictable patterns. Answers (b) and (c) are procedures that are performed to audit the year-end balance in the cash account, not cash flow activity.
Welcome to my world.
ETA: I got that one right, BTW. 🙂