Question 1

Prices in an active market for identical assets is a level ________ fair value estimate.

Accepted Answer

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

Question 2

The general cash account is considered a significant account in almost all audits

Accepted Answer

A) where the ending balance is material. 
B) even when the ending balance is immaterial. 
C) except those of not-for-profit organizations. 
D) where either the beginning or ending balance is material. 
A) where the ending balance is material. 
B) even when the ending balance is immaterial. 
C) except those of not-for-profit organizations. 
D) where either the beginning or ending balance is material.

Question 3

Analytical procedures may be used to assess the year-end balances for financial instruments.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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

Question 5

A factor that increases inherent risk for financial instruments is the complexity of the relevant accounting standards.

Accepted Answer

A) True 
 B)False

Question 6

The three most important audit objectives for cash are accuracy,existence,and classification.

Accepted Answer

A) True 
 B)False

Question 7

The process of transferring money from one bank account to another and improperly recording the transaction is referred to as

Accepted Answer

A) kiting. 
B) lapping. 
C) scamming. 
D) embezzling. 
A) kiting. 
B) lapping. 
C) scamming. 
D) embezzling.

Question 8

The standard bank confirmation form has been agreed upon by the

Accepted Answer

A) SEC and FASB. 
B) AICPA and the SEC. 
C) SEC and the American Bankers' Association. 
D) AICPA and the American Bankers' Association. 
A) SEC and FASB. 
B) AICPA and the SEC. 
C) SEC and the American Bankers' Association. 
D) AICPA and the American Bankers' Association.

Question 9

The test of details of balances procedure that requires the auditor to foot the outstanding check and electronic payment list and deposits in transit is an attempt to satisfy which audit objective?

Accepted Answer

A) cutoff 
B) presentation and disclosure 
C) detail tie-in 
D) completeness 
A) cutoff 
B) presentation and disclosure 
C) detail tie-in 
D) completeness

Question 10

Level ________ estimates use observable inputs other than quoted prices.

Accepted Answer

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

Question 11

Auditors will often prepare a proof of cash when the client has material internal control weaknesses in cash receipts and cash disbursements.The purpose of the proof of cash is to determine the client's accounting records for cash are reliable.List below the four requirements the proof of cash is designed to provide for the auditor.

Accepted Answer

1. All recorded cash receipts were depos

Question 12

Auditors are not always required to obtain bank confirmations.

Accepted Answer

A) True 
 B)False

Question 13

The direct receipt of a confirmation from every bank with which the client does business is

Accepted Answer

A) required by auditing standards for every audit. 
B) not necessary unless material fraud is suspected. 
C) recommended but not required by auditing standards. 
D) necessary for every audit except when there are an unusually large number of active accounts. 
A) required by auditing standards for every audit. 
B) not necessary unless material fraud is suspected. 
C) recommended but not required by auditing standards. 
D) necessary for every audit except when there are an unusually large number of active accounts.

Question 14

Which of the following statements is correct?

Accepted Answer

A) Auditors must obtain bank confirmations for audits of nonpublic entities. 
B) Auditors are required to obtain bank confirmations under international auditing standards. 
C) Auditing standards do not address specific requirements regarding bank confirmations. 
D) Auditing standards do not require bank confirmations. 
A) Auditors must obtain bank confirmations for audits of nonpublic entities. 
B) Auditors are required to obtain bank confirmations under international auditing standards. 
C) Auditing standards do not address specific requirements regarding bank confirmations. 
D) Auditing standards do not require bank confirmations.

Question 15

Which of the following statements is correct?

Accepted Answer

A) Bank personnel are responsible for providing reasonable assurance that a response to a bank confirmation is accurate. 
B) Bank personnel are responsible for providing complete assurance that a bank confirmation is complete. 
C) Bank personnel are not responsible for searching their records for bank balances or loans beyond those included on the bank confirmation. 
D) Bank personnel are not responsible for providing information related to interest on the bank confirmation. 
A) Bank personnel are responsible for providing reasonable assurance that a response to a bank confirmation is accurate. 
B) Bank personnel are responsible for providing complete assurance that a bank confirmation is complete. 
C) Bank personnel are not responsible for searching their records for bank balances or loans beyond those included on the bank confirmation. 
D) Bank personnel are not responsible for providing information related to interest on the bank confirmation.

Question 16

Based on the schedule of interbank transfers above,which of the cash transfers would not appear as an outstanding check 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 17

The client may mail the bank confirmation requests if the auditor believes doing so will increase the likelihood that the confirmation will be returned promptly.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following misstatements is most likely to be uncovered during an audit of a client's bank reconciliation?

Accepted Answer

A) duplicate payment of a vendor's invoice 
B) billing a customer at a lower price than indicated by company policy 
C) failure to record a collection of a note receivable by the bank on the client's behalf 
D) payment to an employee for more than the hours actually worked 
A) duplicate payment of a vendor's invoice 
B) billing a customer at a lower price than indicated by company policy 
C) failure to record a collection of a note receivable by the bank on the client's behalf 
D) payment to an employee for more than the hours actually worked

Question 19

Which of the following should be audited on the interbank transfer schedule?

Accepted Answer

A) Receipts on the interbank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as deposits in transit. 
B) Disbursements on the interbank transfer schedule must always be shown as outstanding checks. 
C) The interbank transfers cannot be recorded in both the receiving and disbursing banks. 
D) All transfers that occurred for the month before and the month after the year-end must be included on the interbank transfer schedule. 
A) Receipts on the interbank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as deposits in transit. 
B) Disbursements on the interbank transfer schedule must always be shown as outstanding checks. 
C) The interbank transfers cannot be recorded in both the receiving and disbursing banks. 
D) All transfers that occurred for the month before and the month after the year-end must be included on the interbank transfer schedule.

Question 20

Presentation and disclosure objectives are important when auditing financial instruments.

Accepted Answer

A) True 
 B)False

Exam 23: Audit of Cash and Financial Instruments

Prices in an active market for identical assets is a level ________ fair value estimate.

The general cash account is considered a significant account in almost all audits

Analytical procedures may be used to assess the year-end balances for financial instruments.

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

A factor that increases inherent risk for financial instruments is the complexity of the relevant accounting standards.

The three most important audit objectives for cash are accuracy,existence,and classification.

The process of transferring money from one bank account to another and improperly recording the transaction is referred to as

The standard bank confirmation form has been agreed upon by the

The test of details of balances procedure that requires the auditor to foot the outstanding check and electronic payment list and deposits in transit is an attempt to satisfy which audit objective?

Level ________ estimates use observable inputs other than quoted prices.

Auditors are not always required to obtain bank confirmations.

The direct receipt of a confirmation from every bank with which the client does business is

Which of the following statements is correct?

Which of the following statements is correct?

Based on the schedule of interbank transfers above,which of the cash transfers would not appear as an outstanding check on the December 31,2015 bank reconciliation?

The client may mail the bank confirmation requests if the auditor believes doing so will increase the likelihood that the confirmation will be returned promptly.

Which of the following misstatements is most likely to be uncovered during an audit of a client's bank reconciliation?

Which of the following should be audited on the interbank transfer schedule?

Presentation and disclosure objectives are important when auditing financial instruments.

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

Filters