Question 1

When dealing with financial instruments, the most difficult balance-related audit objective to test is:

Accepted Answer

A) existence. 
B) accuracy. 
C) rights. 
D) realizable value. 
A) existence. 
B) accuracy. 
C) rights. 
D) realizable value.

Question 2

A proof of cash is not an effective procedure for identifying which of the following types of misstatements?

Accepted Answer

A) All recorded disbursements were paid by the bank. 
B) All recorded cash receipts were deposited. 
C) All amounts that were paid by the bank were recorded. 
D) Some checks were written for incorrect amounts. 
A) All recorded disbursements were paid by the bank. 
B) All recorded cash receipts were deposited. 
C) All amounts that were paid by the bank were recorded. 
D) Some checks were written for incorrect amounts.

Question 3

________ 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

Question 4

Which of the following statements is correct?

Accepted Answer

A) Auditors must obtain bank confirmations for audits of non-public 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 non-public 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 5

Factors that impact inherent risk of financial instruments do not include:

Accepted Answer

A) management's objectives related to investment activity. 
B) the complexity of the securities. 
C) the cost of the securities. 
D) the company's prior experience with certain investments. 
A) management's objectives related to investment activity. 
B) the complexity of the securities. 
C) the cost of the securities. 
D) the company's prior experience with certain investments.

Question 6

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 7

Which of the following balance-related objectives applies to auditing the general cash account?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

An imprest petty cash fund would least likely be used to pay for which of the following items?

Accepted Answer

A) Minor office supplies 
B) Monthly interest expense 
C) Stamps for small mailings 
D) Small contributions to a local charity 
A) Minor office supplies 
B) Monthly interest expense 
C) Stamps for small mailings 
D) Small contributions to a local charity

Question 12

An auditor is reviewing the minutes of board meetings to determine whether any securities are pledged as collateral.This test of the detail of balances relates to the audit objective of:

Accepted Answer

A) rights. 
B) cutoff. 
C) realizable value. 
D) classification. 
A) rights. 
B) cutoff. 
C) realizable value. 
D) classification.

Question 13

The auditor uses a proof of cash to determine whether:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Explain what is meant by a cutoff bank statement, and discuss the purpose of the cutoff bank statement in the audit of cash.

Accepted Answer

A cutoff bank statement is a partial-per

Question 16

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 17

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

Accepted Answer

A) Existence 
B) Accuracy 
C) Completeness 
D) Occurrence 
A) Existence 
B) Accuracy 
C) Completeness 
D) Occurrence

Question 18

The test of details of balances procedure that requires the auditor to foot the outstanding check 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 19

Which of the following verifications would generally not be performed by the auditor in the month subsequent to the balance sheet date?

Accepted Answer

A) Foot the lists of all canceled checks, debit memos, deposits, and credit memos. 
B) Verify the bank statement balances when the footed totals are used. 
C) Verify the book statement balances tie to the cash receipts and disbursements journals for the year under audit. 
D) Review the items included in the footings to make sure that they were cancelled by the bank 
A) Foot the lists of all canceled checks, debit memos, deposits, and credit memos. 
B) Verify the bank statement balances when the footed totals are used. 
C) Verify the book statement balances tie to the cash receipts and disbursements journals for the year under audit. 
D) Review the items included in the footings to make sure that they were cancelled by the bank

Question 20

A proof of cash helps the auditor determine whether all recorded cash receipts were deposited in the bank and whether all recorded cash disbursements were paid by the bank.

Accepted Answer

A) True 
 B)False

Exam 23: Audit of Cash and Financial Instruments

When dealing with financial instruments, the most difficult balance-related audit objective to test is:

A proof of cash is not an effective procedure for identifying which of the following types of misstatements?

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

Which of the following statements is correct?

Factors that impact inherent risk of financial instruments do not include:

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

Which of the following balance-related objectives applies to auditing the general cash account?

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

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?

The majority of financial instruments are valued using:

An imprest petty cash fund would least likely be used to pay for which of the following items?

An auditor is reviewing the minutes of board meetings to determine whether any securities are pledged as collateral.This test of the detail of balances relates to the audit objective of:

The auditor uses a proof of cash to determine whether:

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

Explain what is meant by a cutoff bank statement, and discuss the purpose of the cutoff bank statement in the audit of cash.

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

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

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

Which of the following verifications would generally not be performed by the auditor in the month subsequent to the balance sheet date?

A proof of cash helps the auditor determine whether all recorded cash receipts were deposited in the bank and whether all recorded cash disbursements were paid by the bank.

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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