Question 1

Auditors usually design bank confirmations that address the client's specific circumstances.

Accepted Answer

A) True 
 B)False  False

Question 2

When auditing financial instruments,

Accepted Answer

A) the auditor usually performs more extensive substantive testing to reduce reliance on controls. 
B) analytical procedures are critical in assessing the year-end balances for financial instruments. 
C) the auditor relies on statements and broker's advices from investment managers to test purchases and sales as long as controls were deemed effective. 
D) tests of transactions are generally not performed. 
A) the auditor usually performs more extensive substantive testing to reduce reliance on controls. 
B) analytical procedures are critical in assessing the year-end balances for financial instruments. 
C) the auditor relies on statements and broker's advices from investment managers to test purchases and sales as long as controls were deemed effective. 
D) tests of transactions are generally not performed. C

Question 3

There is significant potential for misstatements and misclassification of financial instruments.

Accepted Answer

A) True 
 B)False  True

Question 4

The general cash account will not be audited if the ending balance is immaterial.

Accepted Answer

A) True 
 B)False

Question 5

Based on the schedule of interbank transfers above,which of the cash transfers would appear as a deposit in transit on the December 31,2015 bank reconciliation?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 6

Procedures that may uncover fraud in the cash receipts area include

Accepted Answer

A) confirmation of accounts payable. 
B) comparison of purchase orders to invoices. 
C) tests performed to detect lapping. 
D) all of the above. 
A) confirmation of accounts payable. 
B) comparison of purchase orders to invoices. 
C) tests performed to detect lapping. 
D) all of the above.

Question 7

When auditing the year-end cash balance,one of the areas of focus is on the accuracy objective.

Accepted Answer

A) True 
 B)False

Question 8

The audit objective of determining that cash in bank,as stated on the reconciliation,foots correctly and agrees with the general ledger can be tested by which of the following procedures?

Accepted Answer

A) performing tests for kiting 
B) receiving and testing a cutoff bank statement 
C) proving the bank reconciliation as to additions and subtractions,including all reconciling items 
D) examining the minutes of the board of directors for restrictions on the use of cash 
A) performing tests for kiting 
B) receiving and testing a cutoff bank statement 
C) proving the bank reconciliation as to additions and subtractions,including all reconciling items 
D) examining the minutes of the board of directors for restrictions on the use of cash

Question 9

Business risks associated with financial instruments are the same for all companies.

Accepted Answer

A) True 
 B)False

Question 10

The auditor is testing for the balance-related audit objective of detail tie-in when they

Accepted Answer

A) prove the schedule of investment activity as to additions and subtractions. 
B) perform a physical inspection of the security. 
C) verify the quoted market prices. 
D) test management's assumptions related to valuation. 
A) prove the schedule of investment activity as to additions and subtractions. 
B) perform a physical inspection of the security. 
C) verify the quoted market prices. 
D) test management's assumptions related to valuation.

Question 11

Many of the auditor's audit procedures in the audit of cash center around the client's bank confirmations.

Accepted Answer

A) True 
 B)False

Question 12

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

Accepted Answer

A) True 
 B)False

Question 13

Tracing outstanding checks to subsequent period bank statements tests the cutoff audit objective.

Accepted Answer

A) True 
 B)False

Question 14

The most important objectives for financial instruments are existence and consistency.

Accepted Answer

A) True 
 B)False

Question 15

A schedule of investment activity will include all of the following except

Accepted Answer

A) the purchases and sales. 
B) ending balances. 
C) the gains and losses. 
D) the opinion of management as to the suitability of the investment to the company. 
A) the purchases and sales. 
B) ending balances. 
C) the gains and losses. 
D) the opinion of management as to the suitability of the investment to the company.

Question 16

The most important balance-related audit objectives in the audit of cash include all except which of the following?

Accepted Answer

A) existence 
B) accuracy 
C) completeness 
D) occurrence 
A) existence 
B) accuracy 
C) completeness 
D) occurrence

Question 17

Explain kiting,and discuss how it is performed.

Accepted Answer

Kiting is the transfer of money from one

Question 18

Companies may purchase marketable securities as a way to temporarily invest excess cash.

Accepted Answer

A) True 
 B)False

Question 19

The auditors test the client's monthly bank reconciliation to verify whether the client's recorded bank balance is the same amount as the actual cash in the bank.Which of the following would not explain a difference between the company's cash balance and the bank's balance for the client?

Accepted Answer

A) deposits in transit 
B) Checks are written by the client in the same month the checks clear the bank. 
C) other reconciling items 
D) outstanding checks 
A) deposits in transit 
B) Checks are written by the client in the same month the checks clear the bank. 
C) other reconciling items 
D) outstanding checks

Question 20

________ is an automated fraud detection tool offered by most banks.

Accepted Answer

A) Positive pay 
B) A bank confirmation 
C) Fraud buster 
D) Check matching 
A) Positive pay 
B) A bank confirmation 
C) Fraud buster 
D) Check matching

Exam 23: Audit of Cash and Financial Instruments

Auditors usually design bank confirmations that address the client's specific circumstances.

When auditing financial instruments,

There is significant potential for misstatements and misclassification of financial instruments.

The general cash account will not be audited if the ending balance is immaterial.

Based on the schedule of interbank transfers above,which of the cash transfers would appear as a deposit in transit on the December 31,2015 bank reconciliation?

Procedures that may uncover fraud in the cash receipts area include

When auditing the year-end cash balance,one of the areas of focus is on the accuracy objective.

The audit objective of determining that cash in bank,as stated on the reconciliation,foots correctly and agrees with the general ledger can be tested by which of the following procedures?

Business risks associated with financial instruments are the same for all companies.

The auditor is testing for the balance-related audit objective of detail tie-in when they

Many of the auditor's audit procedures in the audit of cash center around the client's bank confirmations.

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

Tracing outstanding checks to subsequent period bank statements tests the cutoff audit objective.

The most important objectives for financial instruments are existence and consistency.

A schedule of investment activity will include all of the following except

The most important balance-related audit objectives in the audit of cash include all except which of the following?

Explain kiting,and discuss how it is performed.

Companies may purchase marketable securities as a way to temporarily invest excess cash.

The auditors test the client's monthly bank reconciliation to verify whether the client's recorded bank balance is the same amount as the actual cash in the bank.Which of the following would not explain a difference between the company's cash balance and the bank's balance for the client?

________ is an automated fraud detection tool offered by most banks.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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