Question 1

Branch bank accounts are useful for building banking relations in local communities.

Accepted Answer

A) True 
 B)False

Question 2

Auditors are likely to prepare a proof of cash when the client has

Accepted Answer

A) material internal control weaknesses in cash. 
B) material internal control weaknesses in accounts receivable and revenue. 
C) material internal control weaknesses in accounts payable and inventory. 
D) material internal control weaknesses in payroll. 
A) material internal control weaknesses in cash. 
B) material internal control weaknesses in accounts receivable and revenue. 
C) material internal control weaknesses in accounts payable and inventory. 
D) material internal control weaknesses in payroll.

Question 3

In addition to confirming bank balances of your audit client,a bank confirmation would normally contain

Accepted Answer

A) the client's bank loans with due date,interest rate,and collateral requested. 
B) the client's credit history as regards to paying back loans. 
C) the client's managements bank account information. 
D) the client's business prospects. 
A) the client's bank loans with due date,interest rate,and collateral requested. 
B) the client's credit history as regards to paying back loans. 
C) the client's managements bank account information. 
D) the client's business prospects.

Question 4

Which of the following is an accurate statement regarding cash?

Accepted Answer

A) The amount of cash flowing into and out of the cash account is often larger than that for any other account in the financial statements. 
B) The susceptibility of cash to embezzlement is greater than that for other types of assets. 
C) Auditors must verify whether recorded cash in the general ledger correctly reflects all cash transactions that took place during the year. 
D) All of the above are accurate statements. 
A) The amount of cash flowing into and out of the cash account is often larger than that for any other account in the financial statements. 
B) The susceptibility of cash to embezzlement is greater than that for other types of assets. 
C) Auditors must verify whether recorded cash in the general ledger correctly reflects all cash transactions that took place during the year. 
D) All of the above are accurate statements.

Question 5

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for

Accepted Answer

A) kiting. 
B) lapping. 
C) income smoothing. 
D) channel stuffing. 
A) kiting. 
B) lapping. 
C) income smoothing. 
D) channel stuffing.

Question 6

The starting point for the verification of the balance in the general bank account is to obtain

Accepted Answer

A) a bank reconciliation from the client. 
B) the client's cash account from the general ledger. 
C) a cutoff bank statement directly from the bank. 
D) the client's year-end bank statement. 
A) a bank reconciliation from the client. 
B) the client's cash account from the general ledger. 
C) a cutoff bank statement directly from the bank. 
D) the client's year-end bank statement.

Question 7

A proof of cash represents

Accepted Answer

A) a test of controls and substantive test of transactions. 
B) a substantive test of transactions. 
C) a substantive test of transactions and test of details of balances. 
D) a test of details of balances. 
A) a test of controls and substantive test of transactions. 
B) a substantive test of transactions. 
C) a substantive test of transactions and test of details of balances. 
D) a test of details of balances.

Question 8

The majority of financial instruments are valued at the lower of cost or market.

Accepted Answer

A) True 
 B)False

Question 9

Internal controls over year-end cash balances in the general account can be divided into two categories.List the two below.

Accepted Answer

1. controls over the transacti

Question 10

Cutoff is more important in testing transactions as a client may want to record a gain or a loss on the sale at the end of the year.

Accepted Answer

A) True 
 B)False

Question 11

The majority of financial instruments are valued using

Accepted Answer

A) cost. 
B) fair value estimates. 
C) lower of cost or market. 
D) realizable value. 
A) cost. 
B) fair value estimates. 
C) lower of cost or market. 
D) realizable value.

Question 12

Describe each of the major types of cash accounts maintained by business entities.

Accepted Answer

•General cash account.This is the focal

Question 13

Financial instruments

Accepted Answer

A) include debt securities and money market funds. 
B) such as derivatives can be used as a way of hedging. 
C) must be classified as held-to-maturity securities. 
D) All of the above are correct. 
A) include debt securities and money market funds. 
B) such as derivatives can be used as a way of hedging. 
C) must be classified as held-to-maturity securities. 
D) All of the above are correct.

Question 14

A proof of cash is effective at identifying which of the following misstatements?

Accepted Answer

A) checks written for an improper amount 
B) checks issued to invalid vendors 
C) fraudulent checks 
D) checks recorded in the books for an amount different from that on the check 
A) checks written for an improper amount 
B) checks issued to invalid vendors 
C) fraudulent checks 
D) checks recorded in the books for an amount different from that on the check

Question 15

When auditing financial instruments,a confirmation is sent to the broker-dealer

Accepted Answer

A) only if the client has poor internal controls. 
B) to confirm interest and dividends. 
C) to provide assurance on realizable value. 
D) to confirm year-end holdings. 
A) only if the client has poor internal controls. 
B) to confirm interest and dividends. 
C) to provide assurance on realizable value. 
D) to confirm year-end holdings.

Question 16

The auditor is generally concerned about the realizable value and the rights to cash.

Accepted Answer

A) True 
 B)False

Question 17

Which is not an important objective for financial instruments?

Accepted Answer

A) existence 
B) cutoff 
C) accuracy 
D) realizable value 
A) existence 
B) cutoff 
C) accuracy 
D) realizable value

Question 18

A proof of cash involves a combination of substantive tests of transactions and tests of details of balances.

Accepted Answer

A) True 
 B)False

Question 19

The reason for testing the client's bank reconciliation is to verify whether the client's recorded bank balance is the same amount as the actual cash in bank,except for deposits in transit,checks outstanding,and other reconciling items.The information needed to complete the tests of the reconciliation is provided by the

Accepted Answer

A) client's records and ledgers for the year under audit. 
B) cutoff bank statement. 
C) client's records and ledgers for the subsequent year. 
D) canceled checks for the year under audit. 
A) client's records and ledgers for the year under audit. 
B) cutoff bank statement. 
C) client's records and ledgers for the subsequent year. 
D) canceled checks for the year under audit.

Question 20

Examples of cash equivalents include time deposits,certificates of deposit,and marketable securities.

Accepted Answer

A) True 
 B)False

Exam 23: Audit of Cash and Financial Instruments

Branch bank accounts are useful for building banking relations in local communities.

Auditors are likely to prepare a proof of cash when the client has

In addition to confirming bank balances of your audit client,a bank confirmation would normally contain

Which of the following is an accurate statement regarding cash?

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for

The starting point for the verification of the balance in the general bank account is to obtain

A proof of cash represents

The majority of financial instruments are valued at the lower of cost or market.

Internal controls over year-end cash balances in the general account can be divided into two categories.List the two below.

Cutoff is more important in testing transactions as a client may want to record a gain or a loss on the sale at the end of the year.

The majority of financial instruments are valued using

Describe each of the major types of cash accounts maintained by business entities.

Financial instruments

A proof of cash is effective at identifying which of the following misstatements?

When auditing financial instruments,a confirmation is sent to the broker-dealer

The auditor is generally concerned about the realizable value and the rights to cash.

Which is not an important objective for financial instruments?

A proof of cash involves a combination of substantive tests of transactions and tests of details of balances.

Examples of cash equivalents include time deposits,certificates of deposit,and marketable securities.

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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