Exam 10: Cash and Financial Investments

Since financial investments are assets with a high degree of inherent risk,companies must establish effective internal control over their investments. a.Describe the functions that should be segregated to provide good internal control over financial investments. b.Describe two other internal control policies that should be established for financial investments.

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Question 1

Correct Answer:

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a.The functions that should be segregated with respect to financial investments are:
-Authorization of purchases and sales;
-Custody of the securities;and
-Maintaining records of investments.
b.Other internal controls include (only two required):
-Establishing formal investment policies.
-Maintaining a complete detailed record of investments and revenue from investments.
-Registration of securities in the name of the company.
-Periodic physical inspection.
-Joint control over securities,or use of an independent custodian.
-Preparation of a budget of investment revenue.
-Determination of appropriate accounting by competent personnel.

A practical and effective audit procedure for the detection of lapping is:

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(Multiple Choice)

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Question 2

Correct Answer:

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The Standard Form to Confirm Account Balances with Financial Institutions includes information on all of the following except:

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(Multiple Choice)

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Question 3

Correct Answer:

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Lapping of accounts receivable by an employee is can occur when there is adequate segregation of duties with respect to cash disbursements.

(True/False)

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Question 4

The auditors' count of the client's cash should be coordinated to coincide with the:

(Multiple Choice)

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Question 5

Anderson embezzled $20,000 from her company's account in Bank X.At year-end,she hid the shortage by making a deposit on December 31 in Bank X,drawn on Bank Y.She has not recorded the transaction on the books.Which of the following is most likely to be effective in detecting this fraud?

(Multiple Choice)

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Question 6

Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

(Multiple Choice)

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Question 7

Signed checks should be returned to the cash disbursements clerk for mailing.

(True/False)

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Question 8

Your client left the cash receipts journal open after year-end for an extra day and included January 1 cash receipts in the 12/31/XX totals.All of those cash receipts were due to cash sales.Assuming the client uses a periodic inventory system with a 12/31/XX count of the physical inventory,which of the following is most likely to be true relating to the year XX financial statements?

(Multiple Choice)

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Question 9

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

(Multiple Choice)

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Question 10

Anderson embezzled $20,000 from her company's account in Bank X.At year-end,she hid the shortage by making a deposit on December 31 in Bank X,drawn on Bank Y.She has not recorded the transaction on the books.This is an example of:

(Multiple Choice)

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Question 11

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

(Multiple Choice)

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Question 12

By preparing a four-column bank reconciliation ("proof of cash")at year-end,an auditor will generally not be able to detect:

(Multiple Choice)

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Question 13

Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the:

(Multiple Choice)

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Question 14

Which of the following could not be more efficiently performed with data analytics?

(Multiple Choice)

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Question 15

Verification of cash and other liquid assets on the same date may prevent substitution of one form of asset for another.

(True/False)

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Question 16

Which of the following is correct relating to kiting?

(Multiple Choice)

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Question 17

The Parmalat fraud case involved:

(Multiple Choice)

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Question 18

A proof of cash is an audit procedure that is performed on almost every engagement.

(True/False)

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Question 19

Listed below are four interbank cash transfers,indicated by the letters a,b,c and d,of a client for late December 20X1,and early January 20X2.Your answer choice for the next two questions should be selected from this list. For each of transfers a through d indicate whether cash is understated,unaffected,or overstated by the transfer.

(Essay)

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Question 20

Showing 1 - 20 of 69

A practical and effective audit procedure for the detection of lapping is:

The Standard Form to Confirm Account Balances with Financial Institutions includes information on all of the following except:

Lapping of accounts receivable by an employee is can occur when there is adequate segregation of duties with respect to cash disbursements.

The auditors' count of the client's cash should be coordinated to coincide with the:

Anderson embezzled $20,000 from her company's account in Bank X.At year-end,she hid the shortage by making a deposit on December 31 in Bank X,drawn on Bank Y.She has not recorded the transaction on the books.Which of the following is most likely to be effective in detecting this fraud?

Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

Signed checks should be returned to the cash disbursements clerk for mailing.

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

Anderson embezzled $20,000 from her company's account in Bank X.At year-end,she hid the shortage by making a deposit on December 31 in Bank X,drawn on Bank Y.She has not recorded the transaction on the books.This is an example of:

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

By preparing a four-column bank reconciliation ("proof of cash")at year-end,an auditor will generally not be able to detect:

Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the:

Which of the following could not be more efficiently performed with data analytics?

Verification of cash and other liquid assets on the same date may prevent substitution of one form of asset for another.

Which of the following is correct relating to kiting?

The Parmalat fraud case involved:

A proof of cash is an audit procedure that is performed on almost every engagement.

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