Question 1

An independent bank reconciliation provides evidence of the correctness of the year-end cash balance.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is not a cash management technique frequently used by management?

Accepted Answer

A)  Imprest funds. 
B)  Lockboxes. 
C)  Electronic funds transfers. 
D)  Cash management agreement with financial institutions. 
E)  All of the above. 
A)  Imprest funds. 
B)  Lockboxes. 
C)  Electronic funds transfers. 
D)  Cash management agreement with financial institutions. 
E)  All of the above. A

Question 3

Thinly traded securities have a greater inherent risk related to valuation.

Accepted Answer

A) True 
 B)False  True

Question 4

Kiting is an example of a technique used to intentionally and materially overstate cash.

Accepted Answer

A) True 
 B)False

Question 5

Cutoff statement.
What is a bank cutoff statement and how is it used by an auditor?

Accepted Answer

The bank cutoff statement is a bank stat

Question 6

Which of the following is a cash management arrangement with a bank whereby the organization's customers send payments directly to the client's bank, which deposits the remittance to the client's account?

Accepted Answer

A)  Lockbox. 
B)  Bank transfer. 
C)  Imprest bank account. 
D)  Imprest Account. 
A)  Lockbox. 
B)  Bank transfer. 
C)  Imprest bank account. 
D)  Imprest Account.

Question 7

Lockbox arrangements for the collection of cash have which of the following advantages?

Accepted Answer

A)  The manual processing associated with maintaining control of the receipts is now shifted to a computer. 
B)  Cash is deposited directly into the bank. 
C)  The bank usually establishes only one lockbox geographically next to the client to minimize delay in collections. 
D)  Eliminates the customer decision for the due date of payment. 
A)  The manual processing associated with maintaining control of the receipts is now shifted to a computer. 
B)  Cash is deposited directly into the bank. 
C)  The bank usually establishes only one lockbox geographically next to the client to minimize delay in collections. 
D)  Eliminates the customer decision for the due date of payment.

Question 8

Notes issued by major corporations are known as commercial paper.

Accepted Answer

A) True 
 B)False

Question 9

In assessing risk relating to fraud, auditors brainstorm about potential fraud risks.

Accepted Answer

A) True 
 B)False

Question 10

The standard bank confirmation is used by the auditor to test for lapping.

Accepted Answer

A) True 
 B)False

Question 11

The recording of a marketable security depends, in large part, on management's intention with the investment.

Accepted Answer

A) True 
 B)False

Question 12

Bank confirmations.
There are two parts in a standard bank confirmation. Discuss the purposes and what would be requested by each component and to whom it would be sent.

Accepted Answer

The standard bank confirmation is sent t

Question 13

The audit of the cash account is inherently risky due to volume of activity, liquidity and the account's susceptibility to fraud.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a common test of control for marketable securities?

Accepted Answer

A)  Review the minutes of the board meetings. 
B)  Review broker's advice for accurate recording of security 
C)  Inquire of management about its process for reclassifications. 
D)  Review reports of internal audits. 
A)  Review the minutes of the board meetings. 
B)  Review broker's advice for accurate recording of security 
C)  Inquire of management about its process for reclassifications. 
D)  Review reports of internal audits.

Question 15

The cash balance that a financial institution requires its customer to maintain in a non-interest-bearing account to offset a line of credit is a compensating balance.

Accepted Answer

A) True 
 B)False

Question 16

The emphasis in verifying petty cash is normally on which of the following?

Accepted Answer

A)  Year-end balance. 
B)  Controls over petty cash. 
C)  Transactions for the period. 
D)  Balance sheet classification. 
A)  Year-end balance. 
B)  Controls over petty cash. 
C)  Transactions for the period. 
D)  Balance sheet classification.

Question 17

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Accepted Answer

A)  Counting cash at the depository institution. 
B)  Inquiry of management. 
C)  Sending a standard bank confirmation. 
D)  Tracing the bank reconciliation to the general ledger. 
A)  Counting cash at the depository institution. 
B)  Inquiry of management. 
C)  Sending a standard bank confirmation. 
D)  Tracing the bank reconciliation to the general ledger.

Question 18

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

Accepted Answer

A)  Verify the balance of cash per the bank's general ledger at the balance sheet date. 
B)  Verify the reconciling items on the year-end bank reconciliation. 
C)  Test for intentional lapping of bank transfers. 
D)  Foot the cutoff bank statement for completeness. 
A)  Verify the balance of cash per the bank's general ledger at the balance sheet date. 
B)  Verify the reconciling items on the year-end bank reconciliation. 
C)  Test for intentional lapping of bank transfers. 
D)  Foot the cutoff bank statement for completeness.

Question 19

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

Accepted Answer

A) True 
 B)False

Question 20

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Accepted Answer

A) True 
 B)False

An independent bank reconciliation provides evidence of the correctness of the year-end cash balance.

Which of the following is not a cash management technique frequently used by management?

Thinly traded securities have a greater inherent risk related to valuation.

Kiting is an example of a technique used to intentionally and materially overstate cash.

Cutoff statement. What is a bank cutoff statement and how is it used by an auditor?

Which of the following is a cash management arrangement with a bank whereby the organization's customers send payments directly to the client's bank, which deposits the remittance to the client's account?

Lockbox arrangements for the collection of cash have which of the following advantages?

Notes issued by major corporations are known as commercial paper.

In assessing risk relating to fraud, auditors brainstorm about potential fraud risks.

The standard bank confirmation is used by the auditor to test for lapping.

The recording of a marketable security depends, in large part, on management's intention with the investment.

Bank confirmations. There are two parts in a standard bank confirmation. Discuss the purposes and what would be requested by each component and to whom it would be sent.

The audit of the cash account is inherently risky due to volume of activity, liquidity and the account's susceptibility to fraud.

Which of the following is not a common test of control for marketable securities?

The cash balance that a financial institution requires its customer to maintain in a non-interest-bearing account to offset a line of credit is a compensating balance.

The emphasis in verifying petty cash is normally on which of the following?

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters

Exam 10: Auditing Cash and Marketable Securities

An independent bank reconciliation provides evidence of the correctness of the year-end cash balance.

Which of the following is not a cash management technique frequently used by management?

Thinly traded securities have a greater inherent risk related to valuation.

Kiting is an example of a technique used to intentionally and materially overstate cash.

Cutoff statement. What is a bank cutoff statement and how is it used by an auditor?

Which of the following is a cash management arrangement with a bank whereby the organization's customers send payments directly to the client's bank, which deposits the remittance to the client's account?

Lockbox arrangements for the collection of cash have which of the following advantages?

Notes issued by major corporations are known as commercial paper.

In assessing risk relating to fraud, auditors brainstorm about potential fraud risks.

The standard bank confirmation is used by the auditor to test for lapping.

The recording of a marketable security depends, in large part, on management's intention with the investment.

Bank confirmations. There are two parts in a standard bank confirmation. Discuss the purposes and what would be requested by each component and to whom it would be sent.

The audit of the cash account is inherently risky due to volume of activity, liquidity and the account's susceptibility to fraud.

Which of the following is not a common test of control for marketable securities?

The cash balance that a financial institution requires its customer to maintain in a non-interest-bearing account to offset a line of credit is a compensating balance.

The emphasis in verifying petty cash is normally on which of the following?

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters