Question 1

Explain kiting, and discuss how it is performed.

Accepted Answer

Kiting is the transfer of money from one

Question 2

A growing number of organizations, especially larger organizations, use pre-approved V-cards to make miscellaneous purchases instead of maintaining a petty cash fund.

Accepted Answer

A) True 
 B)False

Question 3

Level ________ estimates use observable inputs other than quoted prices.

Accepted Answer

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

Question 4

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 5

Completeness is an important objective for derivative financial instruments.

Accepted Answer

A) True 
 B)False

Question 6

Debt instruments can be classified as trading securities, available-for-sale securities, or held-to-maturity securities; auditors should ensure that such debt instruments are classified, properly, in the financial statements consistent with accounting standards.

Accepted Answer

A) True 
 B)False

Question 7

The general cash account will not be audited if the ending balance is immaterial.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The bank reconciliation

Accepted Answer

A)  must be done on a daily basis if the client uses electronic banking. 
B)  should be performed by someone independent of the handling or recording of cash receipts. 
C)  should be performed by someone who handles cash disbursements. 
D)  ensures that no cash has been embezzled. 
A)  must be done on a daily basis if the client uses electronic banking. 
B)  should be performed by someone independent of the handling or recording of cash receipts. 
C)  should be performed by someone who handles cash disbursements. 
D)  ensures that no cash has been embezzled.

Question 10

A monthly bank reconciliation of the general bank account on a timely basis by someone involved in either the handling or the recording of cash receipts and disbursements is an essential control over the ending cash balance.

Accepted Answer

A) True 
 B)False

Question 11

Presentation and disclosure objectives are important when auditing financial instruments.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

An imprest petty cash fund

Accepted Answer

A)  is a bank account. 
B)  is used for large, unusual purchases. 
C)  is usually reimbursed at least once a week for good internal control. 
D)  is being replaced by pre-approved purchase cards in many companies. 
A)  is a bank account. 
B)  is used for large, unusual purchases. 
C)  is usually reimbursed at least once a week for good internal control. 
D)  is being replaced by pre-approved purchase cards in many companies.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

To test the client's list of outstanding checks on the bank reconciliation for completeness, the auditor should trace from the list to the checks included with the cutoff bank statement.

Accepted Answer

A) True 
 B)False

Question 18

The auditor uses a proof of cash to determine whether

Accepted Answer

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

Question 19

The audit procedure which requires the auditor to record the last check number used on the last day of the year and subsequently trace to the outstanding checks and the cash disbursements records is performed to satisfy the audit objective of

Accepted Answer

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

Question 20

What should be audited on an interbank transfer schedule?

Accepted Answer

1. The accuracy of the information on th

Exam 23: Audit of Cash and Financial Instruments

Explain kiting, and discuss how it is performed.

A growing number of organizations, especially larger organizations, use pre-approved V-cards to make miscellaneous purchases instead of maintaining a petty cash fund.

Level ________ estimates use observable inputs other than quoted prices.

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

Completeness is an important objective for derivative financial instruments.

Debt instruments can be classified as trading securities, available-for-sale securities, or held-to-maturity securities; auditors should ensure that such debt instruments are classified, properly, in the financial statements consistent with accounting standards.

The general cash account will not be audited if the ending balance is immaterial.

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

The bank reconciliation

A monthly bank reconciliation of the general bank account on a timely basis by someone involved in either the handling or the recording of cash receipts and disbursements is an essential control over the ending cash balance.

Presentation and disclosure objectives are important when auditing financial instruments.

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

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

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

An imprest petty cash fund

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

To test the client's list of outstanding checks on the bank reconciliation for completeness, the auditor should trace from the list to the checks included with the cutoff bank statement.

The auditor uses a proof of cash to determine whether

The audit procedure which requires the auditor to record the last check number used on the last day of the year and subsequently trace to the outstanding checks and the cash disbursements records is performed to satisfy the audit objective of

What should be audited on an interbank transfer schedule?

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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