How would you audit cash and bank, and what is kiting?
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
For cash/bank: obtain bank confirmations directly from the banks (for balances, facilities, security, and other accounts), review year-end bank reconciliations and test reconciling items to subsequent clearing, test cut-off of receipts and payments around year-end, and scan for unusual transfers. Cash is low inherent complexity but high fraud risk because it's liquid. Kiting is a fraud (and error) where someone exploits the float between banks: a transfer is recorded as received in one account before it's recorded as paid out of the other, so the same money appears in two accounts at once, overstating total cash at the period end. You detect it with a bank transfer schedule around year-end — listing all inter-account transfers and checking that the disbursement and receipt dates fall in the same period in both the books and the bank statements. Mismatched dates (recorded in one period, cleared in another) flag potential kiting or cut-off error.
WHAT INTERVIEWERS LISTEN FOR
- ✓Direct bank confirmations; review recs and test reconciling items to clearing
- ✓Test receipt/payment cut-off; cash is liquid → fraud risk
- ✓Kiting exploits inter-bank float to double-count cash
- ✓Detect via bank transfer schedule matching disbursement/receipt dates
COMMON MISTAKES
- ✗Relying on client-prepared confirmations
- ✗No transfer-schedule/cut-off testing
- ✗Not knowing what kiting is
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