Exam 16: Auditing the Financinginvesting Process: Cash and Investments

When an entity uses a trust company as custodian of its marketable securities, the possibility of concealing fraud most likely would be reduced if the:

Match the segregation of duties for investments with the misstatement (due to error or fraud)it can help prevent.  -The maintenance of the securities ledger is separate from that of the general ledger

Under which of the following circumstances would an auditor be most likely to intensify an examination of a $1,000 petty cash fund maintained on an imprest basis?

One purpose of sending a standard confirmation request to financial institutions with which the entity has done business during the year is to:

Tracing a sample of remittance advices to entries in the cash receipts journal tests which of the following assertions for cash?

Which of the following procedures most likely would give the greatest assurance that securities held as investments are safeguarded?

The cash account is affected by all of the entity's business processes.

Examining a sample of cancelled checks for an authorized signature tests which of the following assertions for cash?

Match the type of bank account with its definition:  -This account is the principal cash account of an entity

An auditor ordinarily should send a standard confirmation request to all banks with which the entity has done business during the year under audit, regardless of the year-end balance, because this procedure:

A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

As one of the year-end audit procedures, the auditor instructed the entity's personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year. After the entity's treasurer had signed the request, it was mailed to the bank by the assistant treasurer. What is the major flaw in this audit procedure?

Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities?

An entity has a large and active investment portfolio that is kept in a bank safe-deposit box. If the auditor is unable to examine and count the securities at the balance sheet date but will examine and count the securities shortly thereafter, the auditor most likely will:

A primary purpose of the proof of cash is to:

Which of the following audit procedures is the most appropriate when internal control over cash is weak or when an entity requests an investigation of cash transactions?

The auditor should insist that a representative of the entity be present during the physical examination of securities in order to:

Jones was engaged to examine the financial statements of Virginia Corporation for the year ended June 30. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income?

For each test of transactions and each test of account balances for investments listed below, identify the assertion for which the test provides evidence. 1. Determine whether there has been any permanent impairment in the value of the cost basis of an individual security. 2. Inspect securities if they are maintained by the entity or obtain a confirmation from an independent custodian. 3. Search for purchases of securities by examining transactions for a few days after year-end. 4. Examine brokers' advices for a sample of securities purchased during the year.