My question is: Which are the appropriate boxes to check for a split deposit with cash back? An OnUs check for $20,000 is deposited into a DDA acct, a loan payment is made, and $12,000 cash back. I have alway checked box 34 and 35 and listed all 3 accounts affected by the split deposit. However, I was just told by an independant auditor (for the 1st time) that the cash OUT does not affect the deposit or loan, so I should only check box 32- Negotiable Instrument Cashed, and 35- the OnUs check acct number only.

She is correct. Look at it this way ~~ you are cashing a portion of a check. In item 35 you are only supposed to report account numbers AFFECTED BY the cash. It's one of those concepts you just have to get into your head and once you do it's easy.

We would check item 32 negotiable instrument cashed(s) and indicate any affected account numbers in item 35. When I came to this job I got a lot of resistance over this because I was telling them to do it different than they had been (34 Deposits/Withdrawals was used).
I agree with Dolly Nugent, you just have to wrap your head around it and then it makes sense!

Absolutely. Teach them to follow the cash (not the proceeds of the check).