Exam 23: Audit of Cash and Financial Instruments

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 are provided by the:

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

The bank reconciliation control is enhanced when a qualified employee reviews the monthly reconciliation as soon as possible after its completion.

A partial-period bank statement and the related canceled checks, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the CPA firm's office, is called:

When auditing the general cash account, receipt of a standard bank confirmation is the starting point for verifying the company's general cash account balance.

Which of the following balance-related audit objectives typically is assessed as having high inherent risk for cash?

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

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.

When auditing financial instruments:

The transfer of money from one bank account to another and improperly recording the transfer so that the amount is recorded as an asset in both banks is referred to as kiting.

When an auditor is verifying quoted market prices, they are concerned about the balance-related audit objective of accuracy.

When an audit client uses a service organization to manage their investment activity:

The bank reconciliation:

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

A major consideration in the audit of the general cash balance is the possibility of fraud.The auditor must extend his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there are:

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.

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

Level ________ estimates use observable inputs other than quoted prices.

The auditor needs to have an understanding of the client's internal controls over determining fair value estimates.