Question 1

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

Accepted Answer

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

Question 2

If an auditor waits until the subsequent period bank statement is available to verify reconciling items, it is primarily a test for:

Accepted Answer

A) errors. 
B) omissions. 
C) kiting. 
D) intentional misstatements. 
A) errors. 
B) omissions. 
C) kiting. 
D) intentional misstatements.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The starting point for the verification of the balance in the general bank account is to obtain a bank cut-off statement.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following cycles does not affect cash in bank?

Accepted Answer

A) Capital acquisitions cycle 
B) Inventory and warehousing 
C) Payroll and personnel cycle 
D) Acquisitions and disbursements 
A) Capital acquisitions cycle 
B) Inventory and warehousing 
C) Payroll and personnel cycle 
D) Acquisitions and disbursements

Question 6

Which of the following is likely to be detected as part of the audit of the bank reconciliation?

Accepted Answer

A) Failure to bill a customer 
B) Duplicate payment of a vendor invoice 
C) Cash received by the client after year end, but included in cash receipts in the current year 
D) An embezzlement of cash by intercepting cash receipts from customers before they are recorded 
A) Failure to bill a customer 
B) Duplicate payment of a vendor invoice 
C) Cash received by the client after year end, but included in cash receipts in the current year 
D) An embezzlement of cash by intercepting cash receipts from customers before they are recorded

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

If a bank does not respond to a bank confirmation request, the auditor would most likely:

Accepted Answer

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

Question 9

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) Footing the outstanding checks list and the list of deposits in transit 
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) Footing the outstanding checks list and the list of deposits in transit 
D) Examining the minutes of the board of directors for restrictions on the use of cash

Question 10

Auditing guidance is provided for auditing accounting estimates specifically for fair values estimates as considerable auditor judgment is involved.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Instead of receiving a cutoff bank statement, auditors can wait until the subsequent period bank statement is available to verify reconciling items.Discuss the purpose of reviewing the subsequent period bank statement and list the verifications the auditor performs on this bank statement.

Accepted Answer

The purpose of such a proof is to test w

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to perform extended tests of the year-end bank reconciliation.Assuming the client has a October 31 year-end, these extended tests would not include:

Accepted Answer

A) comparing all September 30 reconciling items with canceled checks and other documents in the October bank statement. 
B) comparing all canceled checks and deposit slips in the October bank statement with the October cash disbursements and receipts records. 
C) carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff statement. 
D) determining that all outstanding checks had cleared by the date of the bank cutoff statement. 
A) comparing all September 30 reconciling items with canceled checks and other documents in the October bank statement. 
B) comparing all canceled checks and deposit slips in the October bank statement with the October cash disbursements and receipts records. 
C) carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff statement. 
D) determining that all outstanding checks had cleared by the date of the bank cutoff statement.

Question 15

The starting point for testing the ending balance of financial instruments accounts is to obtain a gain or loss schedule for the year.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

Explain the purpose of testing the client's bank reconciliation, and discuss the major audit procedures involved.

Accepted Answer

The purpose of testing the client's reco

Question 19

As part of their internal control procedures, management needs to have procedures in place to properly classify financial instruments as trading, available-for-sale, or held-to-maturity, based on:

Accepted Answer

A) cost. 
B) intent. 
C) maturity. 
D) probable future gain or loss. 
A) cost. 
B) intent. 
C) maturity. 
D) probable future gain or loss.

Question 20

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

Accepted Answer

•General cash account.This is the focal

Exam 23: Audit of Cash and Financial Instruments

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

If an auditor waits until the subsequent period bank statement is available to verify reconciling items, it is primarily a test for:

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

The starting point for the verification of the balance in the general bank account is to obtain a bank cut-off statement.

Which of the following cycles does not affect cash in bank?

Which of the following is likely to be detected as part of the audit of the bank reconciliation?

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

If a bank does not respond to a bank confirmation request, the auditor would most likely:

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?

Auditing guidance is provided for auditing accounting estimates specifically for fair values estimates as considerable auditor judgment is involved.

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

Instead of receiving a cutoff bank statement, auditors can wait until the subsequent period bank statement is available to verify reconciling items.Discuss the purpose of reviewing the subsequent period bank statement and list the verifications the auditor performs on this bank statement.

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

When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to perform extended tests of the year-end bank reconciliation.Assuming the client has a October 31 year-end, these extended tests would not include:

The starting point for testing the ending balance of financial instruments accounts is to obtain a gain or loss schedule for the year.

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

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

Explain the purpose of testing the client's bank reconciliation, and discuss the major audit procedures involved.

As part of their internal control procedures, management needs to have procedures in place to properly classify financial instruments as trading, available-for-sale, or held-to-maturity, based on:

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

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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