Question 1

Investments in securities are classified as which of the following?

Accepted Answer

A)  Held-to-maturity. 
B)  Trading securities. 
C)  Available-for-sale securities. 
D)  All of the above. 
A)  Held-to-maturity. 
B)  Trading securities. 
C)  Available-for-sale securities. 
D)  All of the above.

Question 2

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

Accepted Answer

A)  Comparing the values to those securities held by the auditing firm. 
B)  Confirming the fair values with the client as of the close of the year. 
C)  Comparing the fair values with the fair values of similar securities. 
D)  Comparing the fair values to credible publications and websites. 
A)  Comparing the values to those securities held by the auditing firm. 
B)  Confirming the fair values with the client as of the close of the year. 
C)  Comparing the fair values with the fair values of similar securities. 
D)  Comparing the fair values to credible publications and websites.

Question 3

The cutoff bank statement is used by the auditor to address which of the following concerns?

Accepted Answer

A)  Lapping. 
B)  Kiting. 
C)  Omitting outstanding checks on reconciliations. 
D)  All of the above. 
A)  Lapping. 
B)  Kiting. 
C)  Omitting outstanding checks on reconciliations. 
D)  All of the above.

Question 4

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

Accepted Answer

A) True 
 B)False

Question 5

Which assertion related to investments is tested when the auditor examines the documents for any restrictions?

Accepted Answer

A)  Existence. 
B)  Rights. 
C)  Completeness. 
D)  Valuation. 
A)  Existence. 
B)  Rights. 
C)  Completeness. 
D)  Valuation.

Question 6

Imprest payroll account.
What is an imprest payroll account and why is it used by companies?

Accepted Answer

cash is deposited into an imprest payrol

Question 7

?The auditor's performance of an independent reconciliation of the client's bank accounts provides evidence as to the rights and obligations of the year-end cash balances.

Accepted Answer

A) True 
 B)False

Question 8

During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at year-end had not cleared the bank. Which of the following is a likely explanation?

Accepted Answer

A)  A high probability of kiting. 
B)  A high probability of lapping. 
C)  The year-end cash disbursements records had been closed prior to year-end. 
D)  The year-end cash disbursements records had been held open past year-end. 
A)  A high probability of kiting. 
B)  A high probability of lapping. 
C)  The year-end cash disbursements records had been closed prior to year-end. 
D)  The year-end cash disbursements records had been held open past year-end.

Question 9

An analysis of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

Accepted Answer

A) True 
 B)False

Question 10

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

Accepted Answer

A)  Roles and activities falling within appropriate segregation of duties. 
B)  Identification cards with picture identification. 
C)  Encrypted passwords memorized by employees. 
D)  The principle of "absolute knowledge". 
A)  Roles and activities falling within appropriate segregation of duties. 
B)  Identification cards with picture identification. 
C)  Encrypted passwords memorized by employees. 
D)  The principle of "absolute knowledge".

Question 11

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Accepted Answer

A)  The auditor sends the reconciliation to the bank for independent verification. 
B)  The auditor performs the reconciliation for the client to record the proper cash balance. 
C)  The auditor traces the book balance of the reconciliation to the cutoff bank statement. 
D)  The auditor tests deposits-in-transit and outstanding items to other corroborating evidence. 
A)  The auditor sends the reconciliation to the bank for independent verification. 
B)  The auditor performs the reconciliation for the client to record the proper cash balance. 
C)  The auditor traces the book balance of the reconciliation to the cutoff bank statement. 
D)  The auditor tests deposits-in-transit and outstanding items to other corroborating evidence.

Question 12

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Accepted Answer

A)  Custody of receipts by the accounts receivable manager. 
B)  Restricted endorsements placed on the check as soon as it arrives. 
C)  Weekly deposits to a secure bank. 
D)  Reconciliation of bank accounts each month. 
A)  Custody of receipts by the accounts receivable manager. 
B)  Restricted endorsements placed on the check as soon as it arrives. 
C)  Weekly deposits to a secure bank. 
D)  Reconciliation of bank accounts each month.

Question 13

Commercial paper is the term applied to notes issued by those major corporations with poor credit ratings.

Accepted Answer

A) True 
 B)False

Question 14

Management has developed cash management techniques for which of the following reasons?

Accepted Answer

A)  Increase the time to collect billings. 
B)  Reduce the amount of volume of cash transactions. 
C)  Automate the cash management process. 
D)  Increase the liquidity of cash balances. 
A)  Increase the time to collect billings. 
B)  Reduce the amount of volume of cash transactions. 
C)  Automate the cash management process. 
D)  Increase the liquidity of cash balances.

Question 15

The primary purpose of the cutoff bank statement is to verify the reconciling items on the bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 16

Kiting fraudulently places the company's marketable securities in the name of the officers.

Accepted Answer

A) True 
 B)False

Question 17

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

Accepted Answer

A) True 
 B)False

Question 18

Cash flow is often managed by organizations through the use of lockboxes and outsourced cash management arrangements with banks.

Accepted Answer

A) True 
 B)False

Question 19

Fraud by kiting.
Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Accepted Answer

Kiting involves the transfer of cash fro

Question 20

Testing debt securities and commercial paper would typically include an analysis of interest income.

Accepted Answer

A) True 
 B)False

Investments in securities are classified as which of the following?

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

The cutoff bank statement is used by the auditor to address which of the following concerns?

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

Which assertion related to investments is tested when the auditor examines the documents for any restrictions?

Imprest payroll account. What is an imprest payroll account and why is it used by companies?

?The auditor's performance of an independent reconciliation of the client's bank accounts provides evidence as to the rights and obligations of the year-end cash balances.

During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at year-end had not cleared the bank. Which of the following is a likely explanation?

An analysis of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Commercial paper is the term applied to notes issued by those major corporations with poor credit ratings.

Management has developed cash management techniques for which of the following reasons?

The primary purpose of the cutoff bank statement is to verify the reconciling items on the bank reconciliation.

Kiting fraudulently places the company's marketable securities in the name of the officers.

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

Cash flow is often managed by organizations through the use of lockboxes and outsourced cash management arrangements with banks.

Fraud by kiting. Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Testing debt securities and commercial paper would typically include an analysis of interest income.

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

Investments in securities are classified as which of the following?

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

The cutoff bank statement is used by the auditor to address which of the following concerns?

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

Which assertion related to investments is tested when the auditor examines the documents for any restrictions?

Imprest payroll account. What is an imprest payroll account and why is it used by companies?

?The auditor's performance of an independent reconciliation of the client's bank accounts provides evidence as to the rights and obligations of the year-end cash balances.

During the testing of a year end bank reconciliation, an auditor noticed that the majority of checks listed as outstanding at year-end had not cleared the bank. Which of the following is a likely explanation?

An analysis of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Commercial paper is the term applied to notes issued by those major corporations with poor credit ratings.

Management has developed cash management techniques for which of the following reasons?

The primary purpose of the cutoff bank statement is to verify the reconciling items on the bank reconciliation.

Kiting fraudulently places the company's marketable securities in the name of the officers.

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

Cash flow is often managed by organizations through the use of lockboxes and outsourced cash management arrangements with banks.

Fraud by kiting. Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Testing debt securities and commercial paper would typically include an analysis of interest income.

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