Question 1

Stella is auditing the electronic receipts and payments.The extent of her audit work conducted on the bank reconciliation will

Accepted Answer

A) be less extensive than if the company did not engage in electronic receipts and payments. 
B) be more extensive than if the company did not engage in electronic receipts and payments. 
C) depend on the assessed quality of internal controls. 
D) be significantly diminished if Stella can determine that the receipts and payments come from a reputable bank with proper internal controls. 
A) be less extensive than if the company did not engage in electronic receipts and payments. 
B) be more extensive than if the company did not engage in electronic receipts and payments. 
C) depend on the assessed quality of internal controls. 
D) be significantly diminished if Stella can determine that the receipts and payments come from a reputable bank with proper internal controls. C

Question 2

On a bank transfer schedule,if a cash disbursement was recorded in the current fiscal year and the receipt in the subsequent fiscal year,this might be

Accepted Answer

A) the best way to record this type of transaction. 
B) an indication of increased inherent risk with respect to cash. 
C) an attempt to cover a cash shortage. 
D) an indication of an error in recording information by the bank. 
A) the best way to record this type of transaction. 
B) an indication of increased inherent risk with respect to cash. 
C) an attempt to cover a cash shortage. 
D) an indication of an error in recording information by the bank. C

Question 3

Sandra is analyzing the cash cycle of her audit client.Which of the following could indicate a liquidity problem?

Accepted Answer

A) obsolete inventory 
B) high level of inventory 
C) inventory on consignment 
D) backordered inventory 
A) obsolete inventory 
B) high level of inventory 
C) inventory on consignment 
D) backordered inventory A

Question 4

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Accepted Answer

A) verify the cash balance reported on the bank confirmation inquiry form. 
B) verify reconciling items on the client's bank reconciliation. 
C) detect lapping. 
D) detect kiting. 
A) verify the cash balance reported on the bank confirmation inquiry form. 
B) verify reconciling items on the client's bank reconciliation. 
C) detect lapping. 
D) detect kiting.

Question 5

Certain types of misstatements that affect cash may be detected in the audit of tests of controls.Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Accepted Answer

A) failure to bill a customer for goods shipped 
B) billing a customer at the incorrect price 
C) improper reimbursement of an officers' personal expenses 
D) paying an employee at the incorrect wage rate 
A) failure to bill a customer for goods shipped 
B) billing a customer at the incorrect price 
C) improper reimbursement of an officers' personal expenses 
D) paying an employee at the incorrect wage rate

Question 6

Because cash is the most desirable asset for people to steal,it has a higher

Accepted Answer

A) inherent risk. 
B) control risk. 
C) detection risk. 
D) materiality. 
A) inherent risk. 
B) control risk. 
C) detection risk. 
D) materiality.

Question 7

Electronic data interchange (EDI)represents the electronic transfer of

Accepted Answer

A) funds. 
B) business documents. 
C) data between accounting systems of the company's entities. 
D) information between the bank and the company. 
A) funds. 
B) business documents. 
C) data between accounting systems of the company's entities. 
D) information between the bank and the company.

Question 8

Outline the steps for an effective bank reconciliation conducted by competent client personnel.

Accepted Answer

Steps for effective bank reconciliations

Question 9

Which of the following situations would indicate a susceptibility to fraud that pertains to theft of cash?

Accepted Answer

A) lack of segregation of duties between the handling of cash and the recording of cash 
B) cash disbursement cheques requiring only one authorizing signature 
C) payroll rates being approved by the corporate controller 
D) customer master file changes being handled by the controller's executive assistant 
A) lack of segregation of duties between the handling of cash and the recording of cash 
B) cash disbursement cheques requiring only one authorizing signature 
C) payroll rates being approved by the corporate controller 
D) customer master file changes being handled by the controller's executive assistant

Question 10

After testing the bank reconciliation and inspecting the cutoff bank statement received from the bank,the auditor has determined that there are two outstanding cheques from the list on the bank reconciliation that have still not cleared the bank.The auditor's next step should be to

Accepted Answer

A) trace the details of the two cheques to the cash disbursements journal. 
B) trace the details of the two cheques to their associated expense accounts. 
C) reperform the calculations in the bank reconciliation. 
D) compare the total of the bank reconciliation to the bank confirmation. 
A) trace the details of the two cheques to the cash disbursements journal. 
B) trace the details of the two cheques to their associated expense accounts. 
C) reperform the calculations in the bank reconciliation. 
D) compare the total of the bank reconciliation to the bank confirmation.

Question 11

A)Many auditors prove the subsequent period bank statement if a cutoff statement is not received directly from the bank.Discuss the purpose of proving the subsequent period statement,and explain the audit procedures performed during the proof of cash.B)Discuss the circumstances in which an auditor would prepare a proof of cash.

Accepted Answer

A)A proof of cash is a four-column worki

Question 12

The auditor has examined the financial statements,particularly the cash flow statement,and the notes to the financial statements to determine that all relevant information is presented clearly.Which audit assertion is associated with this audit test?

Accepted Answer

A) classification 
B) allocation 
C) understandability 
D) valuation 
A) classification 
B) allocation 
C) understandability 
D) valuation

Question 13

Which of the following misstatements could be detected as part of the tests of a bank reconciliation?

Accepted Answer

A) payment of interest to a related party at an incorrect rate 
B) exclusion of mortgage interest receivable from the balance sheet 
C) deposits recorded as cash receipts at the end of year,but included as outstanding deposits (deposits in transit) 
D) a defalcation of cash by interception of collections before they are recorded 
A) payment of interest to a related party at an incorrect rate 
B) exclusion of mortgage interest receivable from the balance sheet 
C) deposits recorded as cash receipts at the end of year,but included as outstanding deposits (deposits in transit) 
D) a defalcation of cash by interception of collections before they are recorded

Question 14

The process of transferring money from one bank account to another and improperly recording the transaction in both accounts is called

Accepted Answer

A) lapping. 
B) embezzling. 
C) kiting. 
D) a scam. 
A) lapping. 
B) embezzling. 
C) kiting. 
D) a scam.

Question 15

Petty cash tests can ordinarily be performed at any time during the year,but as a matter of convenience they are typically done

Accepted Answer

A) on the balance sheet date. 
B) near the end of the field work. 
C) at the same time as the observation of inventory,since both auditor and client must be present at that time. 
D) on any interim date. 
A) on the balance sheet date. 
B) near the end of the field work. 
C) at the same time as the observation of inventory,since both auditor and client must be present at that time. 
D) on any interim date.

Question 16

What is the purpose of an extended test of the bank reconciliation?

Accepted Answer

A) to verify whether all transactions included in the journals for the last month of the year were correctly allocated to the bank reconciliation 
B) to compensate for material weaknesses in internal control with respect to segregation of duties 
C) to increase detection risk for the audit of cash 
D) to verify whether specific transactions that flowed through the cash account were correctly recorded 
A) to verify whether all transactions included in the journals for the last month of the year were correctly allocated to the bank reconciliation 
B) to compensate for material weaknesses in internal control with respect to segregation of duties 
C) to increase detection risk for the audit of cash 
D) to verify whether specific transactions that flowed through the cash account were correctly recorded

Question 17

A branch bank account is helpful for

Accepted Answer

A) limiting the impact of a fraud. 
B) improving internal controls. 
C) empowering the different branches of the company. 
D) building public relations in local communities. 
A) limiting the impact of a fraud. 
B) improving internal controls. 
C) empowering the different branches of the company. 
D) building public relations in local communities.

Question 18

What is an important benefit of independent preparation of bank reconciliations?

Accepted Answer

A) an opportunity to independently check that cheques have two signatures 
B) the client being able to check that the bank is processing transactions correctly 
C) the ability to internally verify cash receipt and disbursement transactions 
D) the best time to carefully account for cheques issued 
A) an opportunity to independently check that cheques have two signatures 
B) the client being able to check that the bank is processing transactions correctly 
C) the ability to internally verify cash receipt and disbursement transactions 
D) the best time to carefully account for cheques issued

Question 19

Which of the following is an essential internal control in the cash cycle?

Accepted Answer

A) use of two signatures on payroll cheques and payables cheques 
B) independent receipt of the bank statement from the bank 
C) careful accounting of the continuity of cheques returned from the bank 
D) independent preparation of bank reconciliations 
A) use of two signatures on payroll cheques and payables cheques 
B) independent receipt of the bank statement from the bank 
C) careful accounting of the continuity of cheques returned from the bank 
D) independent preparation of bank reconciliations

Question 20

On the last day of the fiscal year,the cash disbursements clerk drew a company cheque on bank A and deposited the cheque in the company account in bank B to cover a previous theft of cash.The disbursement had not been recorded.The auditor will best detect this form of kiting by

Accepted Answer

A) comparing the detail of cash receipts as shown by the cash receipts records with the detail on the confirmed duplicate deposit tickets for three days prior to and subsequent to year-end. 
B) preparing from the cash disbursements book a summary of bank transfers for one week prior to and subsequent to year-end. 
C) examining the composition of deposits in both bank A and B subsequent to year-end. 
D) examining paid cheques returned with the bank statement of the next account period after year-end. 
A) comparing the detail of cash receipts as shown by the cash receipts records with the detail on the confirmed duplicate deposit tickets for three days prior to and subsequent to year-end. 
B) preparing from the cash disbursements book a summary of bank transfers for one week prior to and subsequent to year-end. 
C) examining the composition of deposits in both bank A and B subsequent to year-end. 
D) examining paid cheques returned with the bank statement of the next account period after year-end.

Stella is auditing the electronic receipts and payments.The extent of her audit work conducted on the bank reconciliation will

On a bank transfer schedule,if a cash disbursement was recorded in the current fiscal year and the receipt in the subsequent fiscal year,this might be

Sandra is analyzing the cash cycle of her audit client.Which of the following could indicate a liquidity problem?

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Certain types of misstatements that affect cash may be detected in the audit of tests of controls.Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Because cash is the most desirable asset for people to steal,it has a higher

Electronic data interchange (EDI)represents the electronic transfer of

Outline the steps for an effective bank reconciliation conducted by competent client personnel.

Which of the following situations would indicate a susceptibility to fraud that pertains to theft of cash?

After testing the bank reconciliation and inspecting the cutoff bank statement received from the bank,the auditor has determined that there are two outstanding cheques from the list on the bank reconciliation that have still not cleared the bank.The auditor's next step should be to

The auditor has examined the financial statements,particularly the cash flow statement,and the notes to the financial statements to determine that all relevant information is presented clearly.Which audit assertion is associated with this audit test?

Which of the following misstatements could be detected as part of the tests of a bank reconciliation?

The process of transferring money from one bank account to another and improperly recording the transaction in both accounts is called

Petty cash tests can ordinarily be performed at any time during the year,but as a matter of convenience they are typically done

What is the purpose of an extended test of the bank reconciliation?

A branch bank account is helpful for

What is an important benefit of independent preparation of bank reconciliations?

Which of the following is an essential internal control in the cash cycle?

On the last day of the fiscal year,the cash disbursements clerk drew a company cheque on bank A and deposited the cheque in the company account in bank B to cover a previous theft of cash.The disbursement had not been recorded.The auditor will best detect this form of kiting by

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 17: Audit of Cash Balances

Stella is auditing the electronic receipts and payments.The extent of her audit work conducted on the bank reconciliation will

On a bank transfer schedule,if a cash disbursement was recorded in the current fiscal year and the receipt in the subsequent fiscal year,this might be

Sandra is analyzing the cash cycle of her audit client.Which of the following could indicate a liquidity problem?

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Certain types of misstatements that affect cash may be detected in the audit of tests of controls.Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Because cash is the most desirable asset for people to steal,it has a higher

Electronic data interchange (EDI)represents the electronic transfer of

Outline the steps for an effective bank reconciliation conducted by competent client personnel.

Which of the following situations would indicate a susceptibility to fraud that pertains to theft of cash?

After testing the bank reconciliation and inspecting the cutoff bank statement received from the bank,the auditor has determined that there are two outstanding cheques from the list on the bank reconciliation that have still not cleared the bank.The auditor's next step should be to

The auditor has examined the financial statements,particularly the cash flow statement,and the notes to the financial statements to determine that all relevant information is presented clearly.Which audit assertion is associated with this audit test?

Which of the following misstatements could be detected as part of the tests of a bank reconciliation?

The process of transferring money from one bank account to another and improperly recording the transaction in both accounts is called

Petty cash tests can ordinarily be performed at any time during the year,but as a matter of convenience they are typically done

What is the purpose of an extended test of the bank reconciliation?

A branch bank account is helpful for

What is an important benefit of independent preparation of bank reconciliations?

Which of the following is an essential internal control in the cash cycle?

On the last day of the fiscal year,the cash disbursements clerk drew a company cheque on bank A and deposited the cheque in the company account in bank B to cover a previous theft of cash.The disbursement had not been recorded.The auditor will best detect this form of kiting by

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters