LMN Company has a June 30 year-end and maintains three bank accounts: City Bank-Regular, City Bank-Payroll, and Metro Bank-Special. Your analysis of cash disbursements records for the period June 23 to July 6 reveals the following bank transfers:
Check
Date of Check
Bank Drawn On
Payee
Amount
No.
2476
June 23
Regular
Payroll
$100,000
2890
June 25
Regular
Payroll
200,000
3140
June 28
Regular
Special
100,000
A1006
June 29
Special
Payroll
50,000
A1245
June 30
Special
Regular
25,000
3402
June 30
Regular
Special
125,000
You determine the following facts about each of the first five checks: (1) the date of the cash disbursements journal entry is the same as the date of the check, (2) the payee receives the check two days later, (3) the payee records and deposits the check on the day it is received, and (4) it takes five days for a deposited check to clear banking channels and be paid by the bank on which it is drawn. Check 3402 was not recorded as a disbursement until July 1. This check was picked up by the payee on the date it was issued, and it was included in the payee's after-hours bank deposit on June 30.
What are the purposes of the audit of bank transfers?
