CASH, is the most liquid asset and has the highest risk of being misstated.
Kiting and lapping are typical examples of stealing money/ embezzlement.
For the purpose of CPA exam, you can understand Kiting/ lapping as methods of hiding/misstating the Company's actual Cash position.
As per Becker textbook, "Kiting occurs when a check drawn on one bank is deposited in another bank and no record is made of the disbursement in the balance of the first bank."
Lets understand this- there are two bank accounts in a company- BANK 1/ BANK 2.
Check is drawn on BANK 1(balance of BANK 1-- decreases) and the check is deposited in BANK 2( balance in BANK 2 -- increases), but thats not what happens.
In Kiting , only deposit (in BANK 2) and no disbursement (in BANK 1) is recorded.
So at year end both BANK 1 and BANK 2 shows the higher balance.
Auditors use BANK TRANSFER SCHEDULE, to detect Kiting.
The transfer Schedule records-
KITING is indicated when the date stamped by the receiving bank (BANK 2)precedes the date on which the disbursement was recorded.
LAPPING
Tags: Kiting, CPA Exam , CPA Forum
Kiting and lapping are typical examples of stealing money/ embezzlement.
For the purpose of CPA exam, you can understand Kiting/ lapping as methods of hiding/misstating the Company's actual Cash position.
As per Becker textbook, "Kiting occurs when a check drawn on one bank is deposited in another bank and no record is made of the disbursement in the balance of the first bank."
Lets understand this- there are two bank accounts in a company- BANK 1/ BANK 2.
Check is drawn on BANK 1(balance of BANK 1-- decreases) and the check is deposited in BANK 2( balance in BANK 2 -- increases), but thats not what happens.
In Kiting , only deposit (in BANK 2) and no disbursement (in BANK 1) is recorded.
So at year end both BANK 1 and BANK 2 shows the higher balance.
Auditors use BANK TRANSFER SCHEDULE, to detect Kiting.
The transfer Schedule records-
- Transfers/ Date of transfers between company bank accounts for a few days before year end.
- Clearing date in the the bank and company's books.
KITING is indicated when the date stamped by the receiving bank (BANK 2)precedes the date on which the disbursement was recorded.
LAPPING
Tags: Kiting, CPA Exam , CPA Forum