Question 1

________ 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 2

When auditing financial instruments, the most difficult objective to test is existence.

Accepted Answer

A) True 
 B)False

Question 3

The auditor should test for the proper classification of debt instruments as either trading securities, available-for-sale securities, or held-to-maturity securities in the financial statements.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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 6

A proof of cash includes a reconciliation of cash receipts deposited in the bank with the cash disbursements records for a given period.

Accepted Answer

A) True 
 B)False

Question 7

A proof of cash includes four reconciliation tasks. List below two of those tasks.

Accepted Answer

1. Reconcile the balance on the bank sta

Question 8

Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in cash cutoff at December 31, 2015?

Accepted Answer

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

Question 9

Only tests of details of cash balances are useful when auditors are specifically testing for fraud.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The proper classification of debt instruments in the financial statements is based solely on the nature of the debt instrument.

Accepted Answer

A) True 
 B)False

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

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 14

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 15

"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 interceptin

Question 16

The presentation of cash in the financial statements is normal straight-forward unless restrictions on cash or compensating balance agreements with a bank exist.

Accepted Answer

A) True 
 B)False

Question 17

When auditing financial instruments, interest income and dividends can be recomputed and compared to a public source.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

The standard bank confirmation form has been agreed upon by the

Accepted Answer

A)  SEC and FASB. 
B)  AICPA and the SEC. 
C)  SEC and the American Bankers' Association. 
D)  AICPA and the American Bankers' Association. 
A)  SEC and FASB. 
B)  AICPA and the SEC. 
C)  SEC and the American Bankers' Association. 
D)  AICPA and the American Bankers' Association.

Question 20

The direct receipt of a confirmation from every bank with which the client does business is

Accepted Answer

A)  required by auditing standards for every audit. 
B)  not necessary unless material fraud is suspected. 
C)  recommended but not required by auditing standards. 
D)  necessary for every audit except when there are an unusually large number of active accounts. 
A)  required by auditing standards for every audit. 
B)  not necessary unless material fraud is suspected. 
C)  recommended but not required by auditing standards. 
D)  necessary for every audit except when there are an unusually large number of active accounts.

Exam 23: Audit of Cash and Financial Instruments

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

When auditing financial instruments, the most difficult objective to test is existence.

The auditor should test for the proper classification of debt instruments as either trading securities, available-for-sale securities, or held-to-maturity securities in the financial statements.

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

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

A proof of cash includes a reconciliation of cash receipts deposited in the bank with the cash disbursements records for a given period.

A proof of cash includes four reconciliation tasks. List below two of those tasks.

Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in cash cutoff at December 31, 2015?

Only tests of details of cash balances are useful when auditors are specifically testing for fraud.

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

The proper classification of debt instruments in the financial statements is based solely on the nature of the debt instrument.

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

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

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

The presentation of cash in the financial statements is normal straight-forward unless restrictions on cash or compensating balance agreements with a bank exist.

When auditing financial instruments, interest income and dividends can be recomputed and compared to a public source.

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 standard bank confirmation form has been agreed upon by the

The direct receipt of a confirmation from every bank with which the client does business is

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 Materiality

Assessing the Risk of Material Misstatement

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, 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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