Question 1

The audit and accounting concern addressed in a monthly proof of cash is with:

Accepted Answer

A) adjusting account balances. 
B) reconciling the amounts recorded in the books with the amounts included in the bank statement. 
C) determining the month-end balance. 
D) identifying cash transfers. 
A) adjusting account balances. 
B) reconciling the amounts recorded in the books with the amounts included in the bank statement. 
C) determining the month-end balance. 
D) identifying cash transfers.

Question 2

The test of details of balances procedure that requires the auditor to trace the book balance on the reconciliation to the general ledger is an attempt to satisfy the audit objective of:

Accepted Answer

A) detail tie-in. 
B) existence. 
C) completeness. 
D) accuracy. 
A) detail tie-in. 
B) existence. 
C) completeness. 
D) accuracy.

Question 3

Which of the following is a correct statement?

Accepted Answer

A) A proof of cash receipts is a test of the balance in the cash account at a point in time. 
B) The proof of cash disbursements is effective for discovering a check written for the incorrect amount for which the dollar amount in cash disbursements is also incorrect. 
C) It is extremely difficult for an auditor to detect thefts of cash, especially omitted transactions and account balances. 
D) Segregation of duties is not an important control procedure for cash in a small business. 
A) A proof of cash receipts is a test of the balance in the cash account at a point in time. 
B) The proof of cash disbursements is effective for discovering a check written for the incorrect amount for which the dollar amount in cash disbursements is also incorrect. 
C) It is extremely difficult for an auditor to detect thefts of cash, especially omitted transactions and account balances. 
D) Segregation of duties is not an important control procedure for cash in a small business.

Question 4

A proof of cash disbursements is not effective for discovering checks written for an improper amount, fraudulent checks, or misstatements in which the dollar amount appearing in the cash disbursements records is incorrect.

Accepted Answer

A) True 
 B)False

Question 5

When the auditor sends a confirmation to the broker-dealer, they are testing the balance-related audit objective of:

Accepted Answer

A) detail tie-in. 
B) existence. 
C) cutoff. 
D) rights. 
A) detail tie-in. 
B) existence. 
C) cutoff. 
D) rights.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) Checks written for incorrect amounts 
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 incorrect amounts 
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 8

When auditing financial instruments, analytical procedures can be used to:

Accepted Answer

A) test the reasonableness of interest and dividend income. 
B) test the year-end balance. 
C) determine if the financial instruments were properly valued. 
D) determine if the gain or loss on the sales were properly computed. 
A) test the reasonableness of interest and dividend income. 
B) test the year-end balance. 
C) determine if the financial instruments were properly valued. 
D) determine if the gain or loss on the sales were properly computed.

Question 9

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 10

What should be audited on an interbank transfer schedule?

Accepted Answer

1.The accuracy of the information on the

Question 11

The use of unobservable inputs such as a pricing model or discounted cash flow is an example of a level ________ estimate.

Accepted Answer

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

Question 12

Assessing internal controls related to financial instruments may be necessary in order to reduce audit risk to an acceptable level.

Accepted Answer

A) True 
 B)False

Question 13

The following information applies to the questions below:
Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and 4, of a client for late December 2013 and early January 2014:
  
-Based on the schedule of interbank transfers above, which of the cash transfers would appear as a deposit in transit on the December 31, 2013 bank reconciliation?

Accepted Answer

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

Question 14

Because cash is the most desirable asset for people to steal, it has a higher:

Accepted Answer

A) control risk. 
B) inherent risk. 
C) detection risk. 
D) liquidity risk. 
A) control risk. 
B) inherent risk. 
C) detection risk. 
D) liquidity risk.

Question 15

Determining if the financial instruments included in the schedule of investment activity at year end are stated at appropriate amounts in accordance with accounting standards is the balance-related audit objective of:

Accepted Answer

A) materiality. 
B) realizable value. 
C) consistency. 
D) classification. 
A) materiality. 
B) realizable value. 
C) consistency. 
D) classification.

Question 16

Tests for kiting are performed using only a schedule of intrabank transfers.

Accepted Answer

A) True 
 B)False

Question 17

All of the following would not be uncovered by a bank reconciliation except for:

Accepted Answer

A) duplicate payment of a vendor's invoice. 
B) improper payments of officers' personal expenditures. 
C) payments on notes payable debited directly to the the bank account by the bank but not recorded on the books. 
D) payment to an employee for more hours than he worked. 
A) duplicate payment of a vendor's invoice. 
B) improper payments of officers' personal expenditures. 
C) payments on notes payable debited directly to the the bank account by the bank but not recorded on the books. 
D) payment to an employee for more hours than he worked.

Question 18

Auditors usually design bank confirmations that address the client's specific circumstances.

Accepted Answer

A) True 
 B)False

Question 19

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

Accepted Answer

A) True 
 B)False

Question 20

"Failure to bill a customer" is an example of an error that results in the failure to receive cash, but would not be discovered as part of the audit of the bank reconciliation.State three other examples of errors or irregularities that result in the improper payment of, or failure to receive, cash, but that would not be discovered during the audit of the bank reconciliation.How are these types of misstatements normally uncovered in the audit?

Accepted Answer

•An embezzlement of cash by interception

Exam 23: Audit of Cash and Financial Instruments

The audit and accounting concern addressed in a monthly proof of cash is with:

The test of details of balances procedure that requires the auditor to trace the book balance on the reconciliation to the general ledger is an attempt to satisfy the audit objective of:

Which of the following is a correct statement?

A proof of cash disbursements is not effective for discovering checks written for an improper amount, fraudulent checks, or misstatements in which the dollar amount appearing in the cash disbursements records is incorrect.

When the auditor sends a confirmation to the broker-dealer, they are testing the balance-related audit objective of:

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

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

When auditing financial instruments, analytical procedures can be used to:

A proof of cash represents:

What should be audited on an interbank transfer schedule?

The use of unobservable inputs such as a pricing model or discounted cash flow is an example of a level ________ estimate.

Assessing internal controls related to financial instruments may be necessary in order to reduce audit risk to an acceptable level.

Because cash is the most desirable asset for people to steal, it has a higher:

Determining if the financial instruments included in the schedule of investment activity at year end are stated at appropriate amounts in accordance with accounting standards is the balance-related audit objective of:

Tests for kiting are performed using only a schedule of intrabank transfers.

All of the following would not be uncovered by a bank reconciliation except for:

Auditors usually design bank confirmations that address the client's specific circumstances.

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

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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